Governance and Management

Quarterly Regulatory Update: First Quarter 2017

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Our February edition is traditionally a look at the year ahead, and with a new US administration looking to roll back many of the regulations passed in recent years, there’s plenty to cover. We discuss several areas to watch including banks, tax reform, mutual funds, hedge funds, and private equity. In this edition we also cover recent developments that may create more challenges for active managers—the US Department of Labor’s Fiduciary Rule and a spate of lawsuits against 401(k) and 403(b) plan sponsors.

Finding the Proper Perspective for Peer Comparisons

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Institutions understandably have an interest in the investment results of peers, but a hyper-focus on peer comparisons can be distracting, if not destructive, to effective governance. In this report, we review what can be learned from peer data, where the pitfalls lie, and some examples of how to approach analyzing peer data.

Practical Considerations for ETF Investing

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ETFs offer convenient and, in many cases, economical exposure to a variety of asset classes and investment strategies. However, in some cases investors unaccustomed to ETFs have been negatively surprised by the trading missteps that are possible when transacting these products. In this report, we seek to help investors understand some of the key differences between ETFs and traditional mutual funds by reviewing their mechanics, highlighting sources of tracking error, outlining fee and tax considerations, clarifying market impact, offering a set of key decision points for choosing between an ETF and a mutual fund, and discussing best practices for trading ETFs.

Spending Policy Practices: 2016

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Setting an appropriate spending policy is an important part of effective endowment management, as an institution’s spending policy serves as a bridge that links the long-term investment portfolio (LTIP) and the enterprise. The data and analysis in this report cover a variety of spending topics including spending rule types, the endowment’s support of operations, and effective spending rates.

Investment Publications Highlights: May 2016

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May’s publication summarizes three articles focused on investment management fees. The first argues that the total fees charged to investors increase when incentive fees are more frequently crystallized, the second suggests high fees can significantly reduce an asset class’s diversification benefit, and the third explores five myths about fees and fee structures.

The Foundation of Good Governance for Endowments and Investment Committees

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Suboptimal governance can extend disappointing performance or perpetuate suboptimal past decisions. By contrast, good governance leads of its own design to necessary mid-course corrections. To create the conditions for good governance, endowments should assess whether they have in place the appropriate model for portfolio oversight and management, are upholding their fiduciary responsibilities, and are learning about peer best practices in structure, process, policies, and role of the portfolio.