Comment: Committees and advisory boards in asset management – the potential for optimization still exists?

“Diversity beats simplicity” – so often the relevant, mostly misunderstood slogan in the diversity discussion in the media. The concept can also be transferred in part to the area of the professional composition of committees, advisory boards, and other institutions. If one observes the professional composition of these “entities” (investment committee, etc.) in practice, the impression can be created that hidden potential can still be tapped. Which key points would be interesting for a “dynamic” discussion?

Interests: Status quo and potential for optimization

Criteria for the appointment of investment committees, advisory boards and other forms of bodies can be – without claiming to be exhaustive:

*Appointment due to “friendly” ties
*Cast based on professional expertise
*Cast based on the degree of awareness (“multiplier”, reputation, etc.)

As a rule, there are combinations in the motif location. Depending on the design and nomination, different discussion areas arise.

Neutrality, conflicts of interest and potential risks

Of course, one can argue that bodies with a purely advisory function should be set up under regulations and not be considered as “core management bodies” in the practical implementation of investment decisions. To comply with the regulations, it would appear desirable to minimize the potential for conflict at investment committee meetings. If every portfolio management decision were to be questioned with commitment, resources could be tied up excessively.

If the purpose of committees is seen in control, risk management, and optimization of processes, then an alternative stance can also be taken: The more independent, subject-oriented and non-interested expertise is built up in the committees, the greater the potential for optimizing decision-making processes. The whole area of product vendor-related committee composition could be worthy of critical consideration. Where are there conflicts of interest in individual cases?

“Friendly” ties between committee members, combined with a high level of expertise, can be advantageous if potential conflicts of interest can be addressed openly and discussed constructively. A high level of recognition and an impressive CV can but does not have to be accompanied by in-depth professional expertise.

An interesting question for identifying the need for action

Assuming that purely advisory bodies should bring their full potential to bear in optimizing decisions, “test questions” could sometimes provide an enlightening impression of the depth of substantive commitment and interest of investment committee members. It might be interesting to discuss a question without “prediction”, such as Who are the relevant competitors of the fund manager who is currently answering questions at the investment committee meeting?


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