8 Investment Questions Trustees Should Ask

Taft-Hartley funds employ a number of investment professionals, including portfolio managers and investment advisors. However, final decisions are made by fund trustees, who are ultimately responsible for asking the right investment questions. Here are several to get you started.


Denny Delk, a member of the International Foundation Investment Committee and contributor in planning the 2017 Investments Institute, highlighted eight key questions in a November 2016 Benefits Magazine article. These questions will help your investment committee function properly while maintaining effective relationships with fund professionals.

[Related: Fiduciary Responsibilities for ERISA Plans E-Learning Course]

Are We Keeping to Our Investment Policy, and Do We Need to Revise It?

Funds are moving beyond 60/40 stock/bond allocations and making more sophisticated investment decisions. Are the increasing number of investment choices addressed in your current investment policy? By revisiting the policy and keeping it up to date, you go a long way to validate your practices, ensure that everyone is comfortable with decision processes and remind your trustees that you should focus on investments that you understand.

Do We Need to Consider Some Kinds of Investments That We Don't Have?

The investment industry is continually developing new products aimed at increasing fund balances. While caution should be exercised, time should be taken to consider whether the return is worth the risk in some of these new products.

How Do We Evaluate the Worth of Alternative Investments; Are the Valuations Accurate, and Do We Do the Valuations Often Enough?

Funds are increasingly investing in alternative investment products, including venture capital, funds of funds, private equity and infrastructure projects. Unlike stocks and bonds, establishing true value and tracking performance can be difficult. Trustees must have a way to reasonably establish some value for alternative assets and an appropriate payout timeframe.

Will Our Current Investment Mix Give Us Our Actuarial Rate of Return?

Can you meet your rate assumption goals, or do you need to consider other assets to help your fund along? A fund comprised predominantly of bonds will not yield your assumed actuarial rate of 7%. It is imperative to invest in assets that will meet long-term return targets regardless of economic environment.

It’s essential that trustees meet regularly with their investment professionals, as they may not have the time or expertise to monitor and evaluate investments. The oversight you are paying for is of no worth unless you meet with your professionals and get the information you need to make decisions.

Turnover rate addresses the frequency in which securities within a portfolio are exchanged for other securities. Continually changing economics, politics and tastes require managers to evaluate their holdings. As the mantra goes, “Don’t invest and forget.”Is Our Investment Manager Sticking to His or Her Discipline?

Funds often designate managers to specific investment styles. For instance, one manager may invest only in large cap value stocks, while others may be required to select small and mid-size cap growth stocks. Over time, companies grow and mature and often change classification. Are your managers adjusting their holdings accordingly, or are they suffering from “style drift”? Managers who are passive about their discipline may misalign your portfolios or even violate terms of your investment policy.

Do We Make Effective Use of an Investment Committee?

Depending on fund size, you may delegate some responsibilities to smaller board committees, including an investment committee. Having a smaller group allows the committee to meet frequently to address issues, meet with investment managers and conduct other business impacting the portfolio. In addition to size, the committee must designate clear lines of authority. Can the committee be entrusted to move funds from one manager to another to stay in line with an investment? Can the committee make changes to the investment policy?

Sessions at Investments Institute—March 13-15, 2017 at the Arizona Biltmore—will address many of these questions, helping you evaluate your strategies and determine if your fund is headed in the right direction.

Justin Held, CEBS
Justin Held, CEBS
Senior Research Analyst/Educational Program Specialist at the International Foundation

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