The investment committee plays a crucial role in overseeing a firm’s investment activities and strategy. For global investment firms with complex operations, the investment committee takes on even greater importance. This article will explore the key duties and decision making powers of global investment committee members. From shaping investment policy to evaluating fund manager performance, the investment committee has extensive oversight across all aspects of investment operations. With investment funds growing ever larger in size and complexity, understanding the investment committee’s vital governance role is essential for both committee members and senior management.
Setting the firm’s investment policy and asset allocation
The investment committee is responsible for establishing the overall investment policy and asset allocation that will guide the firm’s investment activities. This includes determining the balance between different asset classes such as stocks, bonds, real estate, private equity, hedge funds, and cash. The committee sets target allocations to these asset classes based on expected risk and return. They also establish guidelines on diversification across geographies, sectors, currencies, and other factors. As market conditions change, the investment committee reviews and adjusts the policy and targets accordingly.
Approving investment vehicles and managers
A key duty of the global investment committee is selecting appropriate investment vehicles and fund managers to implement the firm’s investment strategy. This involves extensive due diligence on factors like the manager’s track record, investment philosophy and process, operations, and risk management. For private market investments, the committee evaluates potential funds across private equity, venture capital, real estate, infrastructure, and other alternatives. Hundreds of funds may be screened before the committee approves an allocation. The committee also monitors existing manager relationships, and can terminate managers not meeting performance and risk standards.
Overseeing performance and risk
Through regular reporting and analysis, the investment committee closely monitors the performance and risk of both overall portfolios and individual managers. This oversight is critical for identifying any deviations from expectations that require intervention. The committee receives detailed attribution analysis breaking down performance by asset class, sector, and other factors. Risk metrics evaluated include volatility, drawdowns, liquidity risk, and concentration risk. Performance issues, loss of key staff, or changes in manager style can trigger the committee to place a manager on watch or withdraw funding.
Guiding strategic initiatives and new offerings
As investor needs and markets evolve, the investment committee helps guide the development of new strategic initiatives and product offerings. This may involve researching investor demand for offerings in new geographies, asset classes, or investment structures. The committee conducts feasibility studies, assesses operational requirements, and provides input on factors like minimum investment size and fee structure. Major strategic moves like acquisitions, joint ventures, or new technologies require investment committee oversight from initial conception to full rollout.
Global investment committee members have extensive and complex responsibilities vital to firm governance and the integrity of investment operations. From shaping investment policy to manager selection, performance oversight, and launching new initiatives, the investment committee is critical for effective decision making across all aspects of a firm’s investment activities.