Über die Autorin bzw. den Autor

G. Timothy Haight, DBA, is the President of Menlo College, Chairman of the Board of Commonwealth Business Bank, and a member of the Board of Advisors of St. Cloud Capital Partners, LLC. He also serves as a member of Southern California Edison's Nuclear Power Decommissioning Fund Committee. Dr. Haight earned a Doctorate in Business Administration (DBA) with a major in business finance and investments from George Washington University. He received his MBA and BS degrees from the University of Dayton.

Dr. Stephen O. Morrell is Professor of Economics and Finance in the Andreas School of Business of Barry University. He has been a visiting professor at the Monterey Institute of Technology and the Georg-Simon-Ohm University in Nuremberg, Germany. Dr. Morrell also serves as a consultant specializing in portfolio strategies for endowment funds, and has served as senior vice president and chief economist for Southeast Banking Corporation; as a financial economist for the Federal Reserve System; and as chairman of the Board of Directors of First State Bank of Ft. Lauderdale, Florida. Dr. Morrell received his BS degree from Virginia Commonwealth University, and his MA and PhD degrees in economics from Virginia Polytechnic Institute.

Glenn E. Ross serves as a member of Towson University's College of Business and Economics Board, and its Alumni Board, and has been an adjunct professor in Towson University's Finance Department. Mr. Ross is President of the Board of Directors of the Albert P. Close Foundation and is a member of the Board of Directors of the Upper Chesapeake Health System Foundation. Mr. Ross earned his undergraduate degree from Towson University and his MBA at Loyola College in Baltimore. Mr. Ross is a Registered Investment Advisor Representative with the SEC.

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How To Select Investment Managers & Evaluate Performance

The key to successful investment management is to select investment professionals who can best meet clients' investment goals, objectives, and needs.

How to Select Investment Managers & Evaluate Performance provides those who are responsible for the investment performance of their institution's funds including pension plan trustees, endowment fund board members, and investment committee board members with the essential knowledge and skill set required to properly select investment managers and to evaluate their performance in a systematic manner.

This book describes cutting-edge techniques used to evaluate the performance of investment funds and their managers and provides valuable insight into the roles and responsibilities in light of the Sarbanes-Oxley Act of 2002 of those charged with this oversight. In a clear and understandable fashion, the authors offer key advice on such topics as establishing investment policy statements, alternative investments, investment approaches and styles, return-risk measurements, how overall portfolio performance is evaluated, how to conduct a search for investment managers, and much more.

Aus dem Klappentext

People charged with the governance and oversight of pension plan, endowment, and trust investments for corporations, nonprofit institutions, and state and local governments face substantial and varied responsibilities. The processes of developing investment policies and strategies; selecting investment managers to implement policies and strategies; and evaluating investment manager performance are critical to success. All too often, however, the individuals with ultimate responsibility for selecting investment professionals and evaluating their performance pension plan trustees, endowment fund board members, and investment committee members of boards lack even the most basic knowledge and understanding of the processes and criteria involved in selecting investment professionals and evaluating their performance.

How to Select Investment Managers & Evaluate Performance provides an invaluable aid to trustees of pension plans, endowments, and trusts who seek to chart and navigate courses for governing and overseeing the investment of the trillions of dollars under their care.

Individuals who are in such roles must be well versed in the full range of techniques used to evaluate the effectiveness of investment professionals. This book one of the very few of its kind offers detailed, clear advice on improving the effectiveness of those who are entrusted with the oftentimes daunting responsibility of selecting, overseeing, managing, and evaluating investment professionals. The expert authors cover all facets of selecting managers and evaluating performance, including information on investment vehicles such as hedge funds, FOFs, and alternative investments; international investments, including currency impact between country investments; return measures, including a detailed discussion of net of tax calculations; measuring the sensitivity of a bond to interest rate moves; mutual funds and their cost-effectiveness for diversification purposes; manager searches using questionnaires; committee meetings and investing consulting services; and much more.

The passage of the Sarbanes-Oxley Act of 2002 combined with explosive growth in the number and types of financial instruments has raised the bar on what is required for those entrusted with oversight responsibilities. How to Select Investment Managers & Evaluate Performance provides those individuals with a comprehensive, yet easy-to-understand guide to being a successful trustee.

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How to Select Investment Managers & Evaluate Performance

John Wiley & Sons

Chapter One

Individuals, households, businesses, governments, and nonprofit organizations have a number of motives for designing, developing and implementing saving and investment programs. Essentially, the savings component of these programs involves reducing current expenditures in order to set aside a portion of such things as current income, earnings, tax receipts, and contributions, while the investment component involves allocating these savings among seemingly ever-growing varieties and combinations of asset classes, investment vehicles and securities.

Individuals and households establish saving and investment programs, among other reasons, to provide retirement income security in order to maintain a desired standard of living during the portion of their lives when income is no longer being derived from work. Businesses and governments may be motivated to organize saving and investment programs as incentive devices to boost employee productivity, reduce worker turnover and take advantage of tax shelters in the case of businesses. Non-pofit organizations arrange saving and investment programs to support current operations, finance capital expenditures, and strengthen the financial basis of the organization. Clearly, there are numerous reasons for establishing saving and investment programs. These motives combined with the investment goals and processes of the investing entities in conjunction with the universe of investment alternatives determine the investment choices and investment portfolios of the saving and investing entities.

Regardless of the entity establishing it, assessing, analyzing and evaluating the performance of an investment program is a critical element in its success. Thorough, timely and accurate investment performance evaluation is a vital step in determining if the objectives of a saving and investment program are being attained, and in taking subsequent actions. Performance evaluation must be undertaken regardless of the decision to either manage the investment program internally or to employ outside investment professionals to manage all or parts of it.

While many entities have established their own saving and investment programs, for example roughly 4.6 million individuals have established their own retirement based saving and investment programs with assets totaling approximately $3.7 trillion, there are several reasons why certain organizations and individuals may be more effective and efficient in establishing programs for others, particularly those programs with long anticipated lives. Individuals considering establishing retirement programs on their own as well as those who seek to contribute on their own to the viability and longevity of organizations such as universities, museums, hospitals and foundations confront difficult planning challenges and potentially high expenses. Specialized knowledge and skills, and substantial information in addition to initial and ongoing administrative costs are required. Moreover, sustained discipline is often necessary to implement such programs.

In contrast, some organizations and individuals may already possess the specialized knowledge and skills and be able to acquire information more easily. They may also enjoy the advantage of declining costs per participant in the development, maintenance, record keeping, compliance and the like for saving and investment programs. Besides economies of scale related to an existing knowledge base, information acquisition, and administrative costs, these organizations and individuals may have strong economic incentives, such as greater employee and contributor loyalty, for arranging saving and investment programs. They may also obtain for themselves and be able to offer tax benefits to participants in saving and investing programs.

Investment sponsors is the term used to refer to organizations and individuals who undertake the responsibility for establishing, designing, developing, implementing, monitoring, and evaluating saving and investment programs on behalf of, and for the benefit of, other persons and groups. The number and variety of sponsored programs have soared over the last several decades. As illustrated in Table 1.1, the most recently available data show there are approximately 1.1 million tax exempt organization-sponsored investment programs with more than 100 million participants and total investments of roughly $12.1. trillion; more than 1.1 million taxable personal trusts with total assets of $1.0 trillion; and, as noted above, about 4.6 million IRA and Keough programs with investments of close to $3.5 trillion.

The explosive growth in the number of sponsored investment plans indicates that the market for saving and investment programs has become significantly broader and deeper. Several factors appear to account for this robust growth. In terms of provision or supply, ongoing technological progress in communications and information processing combined with a wide range of product, investment management, market structure, institutional and regulatory innovations and changes in the financial sector have likely lowered the costs of establishing and maintaining saving and investment plans. Far reaching changes in the U.S. tax code and persistent, heightened competition for qualified employees have also enabled and motivated tens of thousands of midsized to smaller organizations to sponsor saving and investment programs. Sponsored programs are no longer the sole purview of organizations with large numbers of participants and large dollar portfolios-organizations that may experience economies of scale in operating such programs.

With regard to demand, healthy and sustained long-term growth in the U.S. economy has led to continuous increases in incomes and rising wealth, providing the necessary savings and net worth to fund such programs. Demographic trends, perhaps most notably the aging of the baby-boom generation, have spurred the desire to participate in retirement plans and stimulated the willingness for sizable increases in bequests, contributions, gifts and grants to charitable organizations, foundations and trusts.

THE INVESTMENT COMMITTEE

Organizations establishing saving and investment programs have ultimate fiduciary responsibility for the plans they sponsor. These substantial fiduciary responsibilities are vested in the governing body, such as the Board of Directors of a corporate sponsored pension plan and the Board of Trustees of a university endowment fund, of the organization sponsoring the saving and investment program. Governing bodies in turn frequently establish investment committees and delegate and entrust to them the responsibilities for fulfilling the investment mandates set forth by the sponsoring organization. These responsibilities may vary widely, ranging from placing a few thousand dollars of excess cash in a money market mutual fund to overseeing the investment of billions of dollars apportioned among a number of investment managers across several asset classes.

Committee Composition

The investment committee is chaired by a member of the organization's governing body, that is, a member of the Board of Directors or Board of Trustees, as it is a...