Investment Committee Governance Best Practices
(Article by Susan McDermott, Chief Investment Officer with Pavilion Advisory Group Inc.
Benefits and Pensions Monitor, October 2015

The purpose of governance best practices is to promote the interests of the organization—both its mission and supporting financial objectives. While goals may be different for each organization, they typically include growing the real value of the corpus, protecting the organization during periods of market and business stress and ensuring that the organization can meet its obligations. An ancillary objective is to make effective, as well as efficient decisions—as this keeps the governing body engaged. Below, we outline in brief the key aspects that contribute to governance best practices.

How global markets are draining cash from US pensions
MSN Money, October 22, 2015

Recent performance has been so abysmal that some private pension funds have decided to pare back on emerging markets, said Susan McDermott, the Chicago-based chief investment officer of consultant Pavilion Advisory Group. Foundations and endowments are discussing the situation, she said.

“Most of our clients have not looked to reduce the allocation,” she said. “There have been maybe a few that have, just because they’re trying to control the volatility of the overall investment program.”

Consultants Guide Clients through Private Equity Fee Maze
FundFire, August 21, 2015

“That means you don’t have as dynamic of a pricing environment as you do in other parts of the industry,” says Allen Waldrop, managing director at LP Capital Advisors, an alts consulting firm that was purchased by Pavilion Advisory Group last year. “The challenge with private equity is that improvements come quite incrementally, because once a manager has a strategy funded, then those terms are locked down and there aren’t new terms for years—that is until they open their next fund.”

Active or passive target-date funds have similar returns, Morningstar finds
Investment News, May 4, 2015

The primary reasons plan executives choose passive funds are lower fees and a wish for open architecture, said Preet Prashar, defined contribution senior research analyst at Plan Sponsor Advisors.

When asked about the Morningstar results, Mr. Prashar said “many plan sponsors prefer higher-fee, active target-date funds as they believe that active is able to provide a more diversified asset allocation, which can potentially help get better risk-adjusted returns over a full market cycle net of fees.”

Retirement plan assets rise 8.5%, pass $9 trillion
Pensions & Investments, February 9, 2015

Said Jennifer Flodin, defined contribution practice leader at Plan Sponsor Advisors in Chicago: “I think a couple of different things have contributed to the growth of DC over DB. I think the auto features have tremendously helped asset growth (and) inflow growth (for DC plans). On the flip side, you’ve got DB plans who are doing more lump-sum distributions to retirees; in addition some organizations might be reducing the overall contributions to their DB plans.”