Built to last
How to build resilience into an investment process for perpetual portfolios.
Six questions that can help endowments and foundations build a more resilient investment strategy
Endowments and foundations are typically governed by members of a volunteer investment committee who are charged with fiduciary oversight of a perpetual portfolio that is closely tied to the organization’s mission. Yet it’s difficult to maintain the discipline of managing a long-term portfolio as markets ebb and flow, investment fashions change, and investment committees turn over. The paradox of a virtually unlimited time horizon, while investment environments and organizations evolve, suggests the need for a critical tool in the governance toolbox in order to keep a clear focus and ensure successful outcomes.
Crafted wisely, a set of agreed-upon investment beliefs can serve as a tool to enable investment decisions that help endowments and foundations sustain their spending needs now and in the future.
Mercer’s experience helping investment committees develop their belief statements has led us to focus on six key questions in this paper:
What does investment success mean to you?
What is your investment horizon?
How do you define risk, and how much are you willing to take?
What are your asset class and investment implementation preferences?
To what degree should responsible investments be considered within your portfolio?
What governance structure and processes should be in place?