In this article, we provide essential tips for trustees on how to create an efficient and effective investment Committee.

Define the committee's purpose and responsibilities

Prior to forming an Investment Committee, it is important that its purpose and the scope of its responsibilities are clearly defined. The committee's primary focus should be on overseeing the charity's investment strategy, asset allocation, and performance. Additionally, it will want to ensure that its monies are managed appropriately in terms of: risk management; compliance with regulatory guidelines; and alignment with the charity's mission and ethical principles.

Appoint diverse and committed members

Selecting the right individuals on the Investment Committee is paramount to its success. The committee should ideally consist of a diverse group of members with a mix of financial expertise, investment knowledge, and familiarity with the charity's mission. The committee should seek individuals who are committed to fulfilling their responsibilities and who can dedicate time and effort to its work.

Establish a clearly defined investment policy

An effective Investment Committee should operate within a well-defined investment policy that outlines the charity's investment objectives, risk tolerance, asset allocation, and how it will monitor its investments.  Its policy should serve as a guiding document for all investment-related decisions.

Develop a long-term investment strategy

The purpose of the Investment Committee will often depend on the type of charity that is involved. Endowments can often take a long-term perspective and should avoid being overly reactive to short-term market fluctuations.

Regularly review and monitor investments

An Investment Committee should have a robust process for reviewing and monitoring its investments on a regular basis. Reviewing should include assessing investment performance, assessing the risk attached to achieving its return, and will often involve looking at how well the investments align with the charity's goals. Regular monitoring allows the committee to check that their objectives are being met and provides an opportunity to capitalise on new investment prospects.

Seek professional advice

Charity trustees will not always have the expertise needed to make complex investment decisions. Investment Committees will often seek advice from professional financial advisors with experience in charity investments. An expert can provide valuable insights, analysis, and recommendations, aiding the committee in making informed choices.

Emphasise transparency and accountability

Transparency and accountability are essential components of an effective Investment Committee. Committee members should maintain open communication with the chair and board of trustees and other stakeholders, providing regular updates on investment performance and decisions. This fosters trust and ensures that everyone is well-informed about the charity's financial activities.

Foster collaboration and education

Training and educational sessions help keep committee members informed about the latest investment trends, regulatory changes, and best practices in the charity sector.

Align investments with your mission

An Investment Committee may want to consider incorporating environmental, social, and governance (ESG) factors into its investment policy. This can help ensure that ethical and sustainable investment opportunities are considered particularly where they resonate with a charity's mission.

Review and improve committee performance

Investment Committees should periodically evaluate the performance and effectiveness of their committee. They should conduct self-assessments and gather feedback from committee members and stakeholders to identify areas of improvement and if necessary implement changes.

An effective Investment Committee is a valuable asset for a charity, providing the expertise and oversight necessary to ensure sound investment decisions that align with the organisation's mission. By defining the committee's purpose, appointing knowledgeable members, establishing a clear investment policy, and seeking professional advice, trustees can create a committee that maximises returns while upholding the ethical and social principles of the charity. Regular monitoring will help ensure that the Investment Committee plays a critical role in securing the charity's financial future and maximises its positive impact on the stakeholders it serves.

Stay in the loop

Sign-up to our Charities newsletter to get the latest insights straight to your inbox.

Services for charities

Find out how we can help you help others with a range of investment management and banking solutions.

Start a conversation

Tell us about your charity’s challenges and needs and we’ll talk to you about your options.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.