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Build it or buy it? Effective investment program oversight

Posted by Angie Santo-Walter on Jun 7, 2017 11:05:48 AM

Inventment-img.pngA few years ago, my family and I moved to a small town, across the country from where we were currently living, and we were having a hard time finding a home that fit our needs and budget. So, we started talking about building. That presented a whole new set of challenges — finding the right location, team, and resources, and making sure that the house was done when we were set to move. In the world of investment management, nonprofit fiduciaries are faced with similar decisions when trying to decide how to best manage their investment program. Do they build something custom themselves, which can take quite a bit of time, be expensive, and require them to source the right team? Or do they undergo a search to find and purchase the right solution for their organization?

Many organizations manage their investment program by retaining the services of a consultant to provide strategic guidance and manager selection and delegating the responsibility of investment management to their investment committees and staff. In my opinion, this is a build solution. It requires you to have the necessary resources in-house to effectively implement and manage the consultant’s advice. However, many nonprofits don’t have the budget or resources to do this. And many investment committees aren’t spending their time where they should be to effectively drive returns.

Blog-Table.pngSource: Russell Investments and “Investment Committee Decision-Maker Study,” Vanguard Investment Counseling & Research

Most investment committees are convinced that they are spending their time on the highest priority items. However, when you look at the above data, we see that investment committees are spending far more time reacting and looking at the past than making strategic decisions that can materially impact performance going forward.  

This is the biggest reason I encourage nonprofits with under $500 million in their investment programs, or those with limited staff resources, to consider a buy solution, like those offered by an outsourced chief investment officer (OCIO). Partnering with an experienced provider who can add value by helping you make and implement those strategic decisions allows your team to spend its precious committee meeting time on the strategic decisions that can account for up to 80 percent of your success. Russell Investments has created a guide to help nonprofit fiduciaries interested in evaluating an OCIO option. You can request your copy here.

In case you were wondering, my family and I ultimately decided to buy. We found a great house that met our budget, on a quiet street, and we’ve invested time and resources into customizing it to fit our family over the years. Buying was a great decision for us, and it has allowed us to build a network and bring in the specialists that have helped us turn it into a home we love, which we hope to enjoy for many years to come.

 


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Date of first use: May 2017 AI-25342 06-18

Topics: financial oversight, investments

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