OUR THOUGHTS ON:

Investment Committees and Endowment

Higher Education

By Justin Bucci

The role of a higher education institution’s investment committee is critical to the short- and long-term successes of the college or university. Specifically, the investment committee plays a major role in assisting its institution in navigating through periods of upswing and downturns in the economy.  An important duty that the investment committee undertakes is the fiduciary responsibilities of oversight of the institution’s endowment. It is vital that colleges focus on appointing the appropriate personnel to their investment committee’s to achieve longevity of operations and the goals of the institution.

 In order to effectively monitor the investment committee, an institution should establish clearly the roles of the committee, along with the authority level bestowed to the committee as a whole in acting in its fiduciary role. Furthermore, higher education institutions also need to ensure that each committee member is experienced, dedicated and ethical, among other characteristics, to ensure a desired level oversight of the endowment investments. Determining the number, diversity and tenure of members is important in establishing objectivity and thought-provoking ideas within the committee’s meetings. The committee members’ understanding of and expertise with legal regulations is crucial to the organization’s compliance with laws and regulations of the endowment. For example, members should be aware and understand the applicability of laws included within the Internal Revenue Code and specific investment rules such as The Uniform Prudent Management of Institutional Funds Act (UPMIFA).

 Overall, in managing their endowment funds, higher education organizations should be thorough and selective in their elections of investment committees. Institutions should consistently monitor and evaluate the performance of not only of their investments but also the elected committee members themselves. Ensuring that the proper people and processes are in place will work to protect your institution from downfall and continue on a path of a strong endowment fund, and institution-wide betterment.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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