IDC Issues Report on Board Oversight of Fund Performance
The Independent Directors Council of the Investment Company Institute has issued a Report titled “Investment Performance Oversight by Fund Boards.” The Report offers guidance for Boards to assess fund performance against expectations and to review an adviser’s organization and processes. The Report offers recommendations on Board reporting and processes, including an Appendix of key investment terms and a series of questions that Boards should ask. When assessing performance, the Report stresses the importance of agreeing with management on appropriate benchmarks and peer groups. The Report also highlights that Boards must consider other factors such as turnover and transaction costs. The Report also provides a list of triggers that may warrant additional scrutiny including several quarters of relative underperformance, increased trading or turnover, and changes to the portfolio management team.
OUR TAKE: Take a look at Exhibit B, which includes 9 pages of potential board questions.