The first step in setting up any board committee is to create a committee charter. Developing a committee charter doesn’t have to be a daunting task. Templates and sample investment committee charters will provide much of the necessary wording to create an excellent first draft. The primary role of an investment committee is to approve the company’s investment objectives and corporate policies on investing.

An investment committee charter has many of the same parts as other board committees. A charter should outline the committee’s purpose, committee composition, member compensation and how often the committee should meet. In addition, the investment committee charter outlines the committee’s authority, duties and responsibilities. Finally, the charter details the rules for enlisting the help of outside advisors.

Parts of an Investment Committee Charter

Committee charters are written in sections with headings. The following headings are commonly used for investment committee charters:

  • Purpose
  • Meetings
  • Membership
  • Authority and Responsibilities
  • Expenses and Compensation
  • Outside Advisors

Sample Charter for an Investment Committee

The following sample is merely a template. It’s best to have a knowledgeable attorney review the wording.

ABC CORPORATION’S INVESTMENT COMMITTEE CHARTER

Purpose

The Investment Committee is a standing committee of the ABC Corporation.

This charter outlines the individual duties of the committee’s members. The committee is responsible for the investments of the ABC Corporation, which shall collectively be called “the portfolio.”

The purpose of the investment committee is to administer and to operate the portfolio. The members of the investment committee are fiduciaries of the portfolio, with responsibility for overseeing investment policies, general policies, guidelines, investment performance and related risk management. Committee members will fulfill their duties solely on behalf of the company’s mission.

Meetings

The committee shall meet at least twice a year and may meet quarterly as necessary. The committee will take minutes of their meetings and provide copies to the board for the official record.

The committee will designate one individual from among its members to serve as committee chair. Each member will sign a letter of commitment to the committee. The chair will set the agenda for meetings and preside over meetings. A quorum shall consist of a majority of the committee members.

Membership

The committee shall consist of a minimum of three members and a maximum of five members. Each member of the committee shall be appointed for a term of five years. The terms shall be staggered to prevent complete member turnover at once. The board may remove any committee member without notice.

The committee may form subcommittees and delegate authority to them as it deems appropriate. As appropriate, the committee may also delegate investment functions to the company’s investment managers.

Authority and Responsibilities

  1. The committee shall have access to any of the company’s relevant books and records that are necessary for it to carry out its duties.
  2. The committee may require a board officer or company employee to attend investment committee meetings for the purpose of obtaining information relevant to the committee’s duties, except as the board may prohibit.
  3. Establish the company’s investment policies and guidelines and review them regularly.
  4. Authorize and ratify investments to delegated authorities.
  5. Understand the company’s investment goals and how they support the company’s mission.
  6. Monitor the investment funds’ performance, including the impact on the company’s policies and guidelines.
  7. Monitor, retain or replace investment managers and the portfolio’s investment funds.
  8. Review the committee members’ backgrounds to ensure no conflicts of interest exist.
  9. Interpret investment policies and resolve associated questions about the portfolio.
  10. Adopt a written statement of investment policies that includes one or more benchmark portfolios that serve as a metric to evaluate portfolio returns over several years.
  11. Determine the necessary amount of contributions for the company’s portfolio.
  12. Supply notices, reports and disclosures as required by company policy, laws or regulations.
  13. Review fees incurred by the portfolio to ensure they’re reasonable.
  14. Prepare and file the necessary forms as required by laws and regulations.
  15. Review the portfolio’s audited and unaudited financial statements and other financial reports.
  16. The committee will maintain records for administering the portfolio and monitoring the actions of the committee.
  17. Make adjustments and correct inaccuracies in the portfolio as necessary.
  18. Select, monitor and replace third-party advisors and consultants of the portfolio for effectiveness and appropriateness of responsibilities.
  19. Stay current with changes in laws and regulations and prepare amendments to the portfolio as required.

Expenses and Compensation

Committee members will serve without additional compensation. The company will reimburse all committee members for committee-related expenses they actually incur. 

Outside Advisors

The committee may retain independent counsel or other advisors as it deems necessary to conduct investigations into matters within the committee’s scope of responsibilities at the company’s expense. The chief investment officer, along with the approval of the chief executive officer, has the authority to retain or terminate any advisor as appropriate and shall approve fees or other compensation to the advisors, which shall be paid by the company.

Final Tips on Using a Sample Investment Committee Charter 

A committee charter is key to creating a successful investment committee. Samples and templates provide a good starting point for creating an investment committee charter from scratch. Investment committee charters should be customized according to the financial needs of the company. A board portal provides the most secure location for storing confidential documents, such as the investment committee charter, agendas and minutes. A board portal by Diligent also offers a highly secure platform for committee meetings and the exchange of important documents. Diligent’s board portal and Diligent Messenger are just two of the valuable software solutions that Diligent provides under a suite of digital solutions called Governance Cloud.

In addition to aligning investment policies and strategies with the company’s short- and long-term goals, investment committees must set benchmarks to evaluate long-term objectives and continually evaluate their strategies to keep pace with market fluctuations and changes. The success of a corporation’s funds has a direct impact on operations, employment stability and shareholder value. A strong investment committee charter is the foundation for short- and long-term investment success.