Investment Management Models
Investment Services | Discretionary | Non-Discretionary |
---|---|---|
Investment Policy Design | Yes | Yes |
Capital Markets Assumptions | Yes | Yes |
Portfolio Construction | Yes | Yes |
Asset Allocation - Strategic Targets | Yes | Yes |
Asset Allocation - Tactical Shift Response Time | Greater response time due to the ability to make decisions outlined in the Investment Policy Statement | Limited response time due to the need to seek approval from the Investment Committee |
Manager Research / Due Diligence | Yes | Yes |
Manager Selection - Hire / Terminate | Greater ability to quickly select and implement managers best suited for designated asset class | Investment Committee is responsible for selecting managers presented by the consultant - Limits response time |
Fiduciary Responsibility - Investment Provider | Higher as a result of increased decision making responsibilities | Lower due to increased role of Investment Committee |
Fiduciary Responsibility - Investment Committee | Lower - Allows Investment Committee to focus more attention on policy and governance | Higher level of responsibility due to investment decision-making role |
Performance Reporting | Yes | Yes |
Fees (Explicit) | Higher as a result of increased decision making responsibilities | Lower due to increased role of Investment Committee |
For some investment committee members, meeting with investment managers can be the most intellectually stimulating, engaging and enjoyable part of their duties, and may be a principal reason why they volunteered for the role. There's always a risk, therefore, that moving to a discretionary model could be viewed negatively by some investment committee members who are reluctant to relinquish that responsibility.