The investment process we went through consisted of the following steps:
Developed investment manager evaluation criteria
Met with many candidate investment managers. Listened to their presentations and how they positioned themselves. Learned about investing and developed investment manager evaluation criteria from the discussions and other material.
Evaluated and identified a short list of candidate investment manager(s)
Continued to meet with many candidate investment managers. Compared them against each other using our investment manager evaluation criteria. Eliminated many companies and teams from consideration. We found that many companies and teams that we spoke with did not take the time to understand what we were trying to accomplish, were not responsive to our interests or directions or simply did not evidence the breadth or depth of knowledge that we thought was going to be important to be successful.
Evaluated and selected investment manager(s)
Arranged a bakeoff between a short list of candidate investment managers. All short list candidate meetings were held over a couple of day period. Told them who they were competing against. Met with leaders as well as the teams for each candidate. Asked similar questions of the different candidates and compared answers. Evaluated responses and interactions within the teams. Focused on understanding how the teams interacted among themselves, what they chose to focus on, how they synthesized new thinking and how they communicated and supported their thoughts and opinions. Decided whether to use one or more investment managers. As we progressed through the process we found ourselves thinking that there would be some advantages in placing all of our business with one investment manager. As we saw it there was a tradeoff between the convenience and consistency of using one investment manager against the ability to learn from the differences of how two different investment managers operate. Selected a single winning investment manager and let other candidates know the results. Provided feedback to the unsuccessful candidates about their bids. After selection of the investment manager processed paperwork to open accounts with the winning company and team.
Developed investment goals and priorities (returns, risk, time frames)
Learned more details about investing from conversations with the winning investment manager and other material. Learned about modern portfolio and other investment theories. Learned about the different asset classes, potential returns, risk, risk management, and investment horizons. Learned about current market outlook. Developed general investment goals and priorities consistent with goals and priorities of the foundation.
Developed general asset allocation strategies and investment performance evaluation criteria
Developed asset allocation strategy consistent with our investment goals and priorities. Learned about asset managers, how they operate and how they should be judged. Learned about indices and different methods of evaluating financial performance. Developed investment performance evaluation criteria for investment manager and asset managers.
Developed Investment Policy Statement
Developed and wrote Investment Policy Statement reflecting investment goals and priorities, asset allocation strategies, and performance evaluation criteria.
Deployed capital into asset classes
Started deployment of capital as driven by Investment Policy Statement. Deployment occurred over period of months as driven by paperwork, market conditions, asset manager initial capital requirements, cash flow and other considerations.
Monitor and evaluate investment performance
Started monitoring investment performance. Refined required reporting to reflect criteria that was going to be used to evaluate investment performance. Now participate in quarterly and yearly reviews with investment manager to discuss and evaluate investment performance.
A background about our experience of forming and running a family foundation, as well as our views about the future direction of philanthropy is available below.