Wednesday, April 20, 2022

Excerpt Tour and Giveaway: The Investment Committee Guide to Prudence by Jonathan J. Woolverton, CFA


The Investment Committee Guide to Prudence

Increasing the Odds of Success When Fulfilling Your Fiduciary Responsibilities in the Administration of Pension/Investment Assets

by Jonathan J. Woolverton, CFA



GENRE: Non-Fiction 



JJ's investment career spans more than five decades. He has been the chief investment strategist for a pension plan sponsor, a managing director and senior consultant within a global investment planning consultant firm, and a managing director and chief operating officer of an investment management organization. Over his career, JJ has attended well over a thousand investment committee meetings as a plan sponsor, a consultant, and a money manager. In the majority of these meetings, he has found that committee members lack three things: in-depth investment expertise to effectively carry out their fiduciary responsibilities, the necessary time allocation to administer and manage the investment program in the best interests of the beneficiaries, and the ability to develop an efficient monitoring system to hold all service providers accountable for the products and services they provide.


This book outlines the steps to be taken in establishing investment policy; formulating asset mix strategy; creating an appropriate investment management structure; undertaking investment manager searches; and highlighting the conflicts of interest, biases, and self-interests of the various service providers.


This book is designed to assist members of investment committees in their role as fiduciaries/trustees/administrators.



One of the more important tasks of the investment committee members is to agree upon a common set of beliefs as they relate to the various segments of the capital market. The following capital market beliefs should be addressed: first, investment committee members need to decide whether they believe that markets are efficient—or not. If specific asset classes or asset class segments are perceived to be within a relatively efficient market, then the focus should be on seeking out passive/index-matching approaches

within these markets that will mirror the asset class, or asset class segment, at the lowest fee. Active management is a viable alternative if investment committee members believe that: a) some markets are inefficient and can be exploited by active management to provide a value-added return, within an acceptable risk tolerance, while more than compensating for the cost and risk of active management; and b) that valued-added managers can be identified in advance with sufficient confidence. If choosing active management, the investment committee must also recognize that costs matter—costs are certain, whereas the value added is uncertain.

A second market-related belief is the importance of time. The pension or investment fund is usually (but not always) considered to have a longer-term time horizon (i.e., disbursements from the fund will continue many years in the future); in that case, depending on the resilience of required contributions in downturns, short-term volatility of fund results might not be a major concern. From a return perspective, the odds significantly favor ownership-type assets the longer the perceived time horizon. Studies have stated that an additional long-term net return of 1% per annum may well reduce long-term funding costs by 15–25% in an open plan or for a defined-contribution plan member, and by 10–15% in a closed plan or for a retiree living on a pool of assets.

Another market-related belief is the concept of mean reversion. One of the few truisms within the capital market is that returns tend to revert back to their normal trend line over time. However, there are two caveats here: the first is determining what the “normal” trend line is, which too can change with the era or regime, and the second is that the direction of the expected reversion is much more evident than its timing.

In addition, there is the belief that higher risk can be compensated for by higher returns—for sound economic reasons. The focus here is to determine the extent of: a) the shorter-term market price risk that the fund and its risk-bearers are willing to accept; and b) the greater uncertainty of longer-term dollar downside. Note, again, the difference here between “risk” and “uncertainty.


AUTHOR Bio and Links:

Jonathan J. Woolverton, CFA, has spent his whole career in the investment field—over fifty years. After graduating from university in Pennsylvania, he moved to Toronto, Canada, where he began his career in the investment department of an insurance company. In his role as investment officer he was responsible for formulating investment strategy and overseeing all investments within the equity and fixed-income divisions. JJ later joined Ontario Hydro as their chief investment strategist where all pension funds were managed internally.

JJ left the money management business to become an investment planning consultant. He was a founding partner and managing director of Frank Russell Canada. He moved back to the money management side as the managing director and chief operating officer of Guardian Capital Inc. JJ graduated from Westminster College with a BBA and achieved his Chartered Financial Analyst certification. JJ has published numerous articles on the pension and investment industries and has been the keynote speaker at many conferences and seminars.

CONNECT WITH Jonathan J. Woolverton

WEBSITE - Jonathan J. Woolverton, CFA – Author Website (

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