An informative guide to selecting and evaluating external investment professionals This book-one of the very few of its kind-is 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. It covers many aspects of this essential endeavor, including return measures, fixed income and duration, manager searches, committee meetings, and much more. G. Timothy Haight (Atherton, CA) is President of Menlo College in Silicon Valley. Stephen O. Morrell, PhD (Coral Springs, FL) is Professor at Andreas School of Business of Barry University. Glenn Ross (Baltimore, MD) is a Managing Director and cofounder of Archstone Portfolio Solutions.

Table of Contents:
Preface ix About the Authors xi CHAPTER 1 Investment Sponsors 1 The Investment Committee 4 The Variety of Investment Sponsors 7 Taxable Investment Sponsors 24 Summary 29 Chapter 2 Investment Policy Statement 31 Investment Philosophy and Goals 31 Investment Return Objectives 32 Risk Tolerances 32 Constraints 33 Investment Strategy 33 In-House or Outside Manager 34 Investment Policy 34 Securities Types and Risk Characteristics 35 Asset Allocation Guidelines 39 Evaluation of Performance 41 Benchmark Portfolios 51 Periodic Review 52 Summary 53 Chapter 3 Investment Overview 55 Capital Appreciation versus Current Income 55 Active versus Passive Investment Approaches 57 Investment Styles-Equity Managers 57 International Investing 65 Investment Styles-Fixed Income Managers 65 Summary 68 CHAPTER 4 Alternative Investment Vehicles 71 Hybrid Securities 72 Derivative Contracts 75 International Investment Vehicles 81 Real Estate Investment Vehicles 91 Investment Vehicles for Accredited Investors 93 Commodities and Collectibles 102 Summary 104 Chapter 5 Return Measures and Reporting Techniques 105 Dollar-Weighted Rate of Return 105 Time-Weighted Rate of Return 108 Annualized Rates of Return 110 Geometric Mean 111 Total Return and its Components 112 Compound Growth 115 Summary 118 Chapter 6 Return-Risk Measurement 119 Return Relative 119 Standard Deviation 121 Portfolio Risk Measure 124 Scatter Diagram 127 Coefficient of Variation 128 Regression Analysis 129 Portfolio Size and Diversification Levels 131 Regression Analysis of Fund I 132 Additional Performance Indexes 133 Summary 134 Chapter 7 Portfolio Performance Evaluation 137 Performance Results 138 Composite Index 139 Return Risk Analysis 140 Universe Comparison 141 Evaluating the Asset Allocation Decision 143 Summary 155 Chapter 8 Equity Performance Evaluation 157 Equity Performance Criteria 158 Sector Analysis 159 Return-Risk Comparison 163 Market Characteristics 164 Attribution Analysis 169 Summary 171 Chapter 9 Fixed Income Performance Evaluation 173 Asset Allocation Ranges and Anticipated Contributions 174 Issuers of Fixed Income Securities 174 Bond Indexes 176 Bond Prices and Yields 177 Term Structure of Interest Rates 180 Quality of Fixed Income Securities 181 Credit Risk 181 Interest Rate Risk 184 Duration 186 Convexity 189 Maturity Characteristics 191 Return Analysis 191 CFA Institute Standards 195 Fixed Income Management Styles 196 Passive Fixed Income Management 196 Active Fixed Income Management 198 Performance Analysis 199 Summary 202 CHAPTER 10 Investment Companies as Investment Vehicles 203 Investment Companies 205 Regulation of Investment Companies 207 Types of Investment Companies 208 Selecting Mutual Funds 215 Performance Evaluation 216 Summary 217 Chapter 11 Investment Manager Search Process 219 Search Committee 219 Establishing Goals 220 Number of Managers 220 Candidate Identification 222 Management and Related Fees 223 Firm Size and Ownership 225 Request for Proposals (RFP) 225 Screening of Candidates 230 Candidates Presentations 234 Verification and Reference Checking 236 Cost of Switching 239 Administration of Change 240 Summary 240 Chapter 12 Conducting Investment Committee Meetings 243 Meeting Preparations 243 Agenda and Meeting Materials 245 Setting the Agenda 245 Responsibilities of the Chairperson 246 Investment Consulting Services 246 Investment Performance Review and Outlook 247 Old Business 250 New Business 251 Summary 251 Index 809