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Assisting Boards and Investment Committees to make decisions about investment consulting relationships

Best Practices for Evaluating Investment Consultants


Is your investment consultant adding value?  Check out our slide deck of  Best Practices for Evaluating Investment Consultant Performance.

Performance Evaluations at Private Foundations

January 5th, 2014

Diligence Review Corp.

Our experience with private foundations tells us that these groups place great importance on ensuring that all parts of the organization are working in alignment with their stated mission. A useful tool employed by many is the performance evaluation process, which measures how well a person or a function of the organization compares to a predefined objective or benchmark. Some examples of performance evaluations include the establishment of guidelines for measuring the performance of individual employees, or the development of a performance evaluation process to measure the effectiveness of the foundation’s program or grant-making activities.

Another key area where performance evaluation is critical is in measuring the return on the investments of the foundation. Typically, the foundation uses one or more outside investment advisory firms to manage investment portfolios. Each investment advisory firm assigns an investment manager to oversee the portfolio and to provide the foundation Board or Investment Committee with monthly, quarterly and annual performance reports. Benchmarks are used to measure how well these managers perform.

An growing trend we have noticed with many investors, including foundations, is the use of a single discretionary investment consultant to manage and oversee all of the investment portfolios. These are known as Outsourced Chief Investment Officers or Outsourced CIOs. An Outsourced CIO relationship often involves the delegation of decision-making authority for portfolio structuring, strategic and tactical asset allocation, global investment manager selection, and day-to-day investment portfolio oversight.  As the trend toward OCIO relationships continues, we would expect to see growing interest within the foundation community for evaluating the performance of these key, high level relationships.

Below are two documents that outline our views on this subject:

Please also examine an excellent paper written by Brian A. Schroeder at Investment Change Evaluations, LLC: 


Role of the Investment Consultant – Workshop Facilitation

September 25th, 2013

Diligence Review Corp.

Today’s complex, global investment markets are causing public pension fund Boards of Trustees to carefully re-consider the governance structures that are in place to manage the investment organizations they lead. Each investment organization has a unique culture and mission, and so there is no one-size-fits-all approach that will work for all funds.  Decisions that must be made by the Board of Trustees are how much investment discretion to delegate to the investment consultants, how much should be delegated to investment staff, and how much should be retained by the Board.

Once these decisions are made, a Consultant Roles and Responsibilities document lays the foundation for a properly functioning investment consulting relationship.  The document governs how the investment consultant functions in relationship to the investment organization and also specifies the duties to be performed.

The majority of our clients have multiple investment consultants.  We recommend that organizations update the Consultant Roles and Responsibilities document no less frequently than once every 5 years.  The document:

  • Describes the needs and expectations of the organization with respect to the investment consulting relationship
  • Describes exactly how the consultant is expected to interact with the organization’s governing fiduciaries, managing fiduciaries and operating fiduciaries
  • Provides guidance about the investment consulting relationship to all fiduciaries within the organization
  • Allows the organization to monitor compliance concerning the investment consultant relationship
  • Provides the basis of a sound consultant search process and/or consultant performance evaluation process

Diligence Review Corp. professionals facilitate on-site or off-site workshops for institutional Boards of Trustees. These workshops transmit the highest quality information, processes, and best practices that our founders have developed during their collective decades of experience analyzing and working on investment consultant issues.

For more information on this workshop, please see Board Workshop on Consultant Roles and Responsibilities.

Best Practices for Evaluating the Performance of the Discretionary Fiduciary

August 27th, 2013

Diligence Review Corp.

Check out our:  Best Practices for Evaluating the Performance of the Discretionary Fiduciary.