A Primer for Investment Trustees
Presentation to the CFA Society of Minnesota
June 23, 2011
Agenda
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Background
Genesis of the Primer
The Primer’s intended audience
Others who should be interested
Why are investment trustees important?
Key issues addressed by the Primer
How the book is organized and written
Top 10 questions trustees ought to ask
How to get the Primer
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Background
• The Research Foundation of CFA Institute
– Non-profit organization affiliated with but separate from CFA Institute
– Mission: Produce and distribute high-quality independent research to
the investment community focused on the practical application of
investment finance
• The Research Foundation produces a number of products
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Monographs/books
Literature reviews/occasional papers
Webinars
Conferences/workshops
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Genesis of the Primer
• Fund sponsors are an important segment of the
investment community
– Yet from an educational perspective, they get little attention
• The body of educational literature available to fund
sponsors is infinitesimal
– Know of any part of the Body of Knowledge associated with
fund sponsors?
– Information is available related to some of the tools needed
(e.g., performance measurement)
• Missing is a discussion of the role of the fund sponsor
and how people can effectively act in that role
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The Primer’s Intended Audience
• Investment trustees (obviously)
• Who is an investment trustee?
– Any person serving on a governing body charged with high-level
supervision of investment assets
– Don’t have day-to-day responsibility for managing assets
– Focus is on providing direction to the fund
• Hiring and evaluating top staff leadership
• Setting investment policy
• Monitoring performance relative to objectives
• Don’t need extensive investment experience to do the
job well
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Others Who Should Be Interested?
• Basically, anyone who interacts with investment trustees
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Staff persons working at funds
Investment managers
Consultants
ERISA lawyers
Custodians, actuaries, brokerage firms
• By understanding the issues faced by investment
trustees, these groups can provide better services
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Why Are Trustees Important?
• Literally trillions of dollars and the well-being of millions
of people are affected by the actions of trustees
• Trustees set the tone
– Can’t guarantee strong performance but can create the
structure that incentivizes excellent decision-making
– Bad trustees can certainly produce bad outcomes
– Two extremes guaranteed to lead in the wrong direction
• The micro-managing trustee
• The unengaged (or intimidated) trustee
• New trustees generally receive no training for their roles
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Key Issues Addressed
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Governance structure
Investment policy
Fund’s mission
Investment objectives
Risk tolerance
Investment assets
Performance evaluation
Ethics in investing
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How the Book is Organized and Written
• In form of a conversation with a new trustee
• This trustee serves at a university that has DB and DC
retirement plans, an endowment fund and a foundation
• Non-technical discussion
• Important features
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Chapter “Takeaways”
Appropriate questions for a trustee to ask
Glossary of terms
Sample governance and investment policy statements
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Top 10 Questions A Trustee Ought to Ask
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How is the governance of the fund organized, who are the key participants, and how do
they relate to one another in terms of accountability and authority?
Are the trustees relatively involved as a group in terms of managing the staff or do they
tend to be “hands off”?
May I have a copy of your investment policy statement?
Who are the fund’s primary stakeholders and what are their interests?
How do we define the liabilities for our fund and how do we assess its funded status?
Do we have an established process for identifying, quantifying and managing investment
risk?
Where the option is available, why don’t we passively manage our assets?
What are the benchmarks used to evaluate our investment program? Are they fair and
appropriate?
How are our investments performing? Do the results indicate that we are fulfilling the
fund’s mission and objectives?
Do we have an code of conduct for trustees and staff?
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How to Get the Primer
• Hardcopy: $9.95 (at Amazon or CFA Institute)
• PDF download: Free
• E-books
– Amazon ($0.99)
– Apple (free)
• More information:
– www.cfapubs.org/loi/rf
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