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Portfolio Management and Performance

Independent directors evaluate a fund’s investment performance on an ongoing basis. Their role is to provide oversight, and not micromanage or second-guess the portfolio manager’s decisions to buy or sell particular securities. Directors look at a fund’s performance as a whole and over time, taking into consideration its investment objectives, strategies, and risks to evaluate whether the fund is meeting its stated objectives. Director oversight will involve understanding a fund’s characteristics and performance expectations, understanding the adviser’s investment organization and processes, evaluating the fund’s performance, and addressing any performance issues. An important element of a board’s ability to do this is to receive periodic presentations and detailed written material from portfolio managers. While review of fund performance is an integral part of the advisory contract renewal process, boards generally do not limit their review of fund performance to contract renewal time. Instead, review of fund performance typically happens, in some fashion, at every meeting.

TO LEARN MORE

Read the IDC paper Investment Performance Oversight by Fund Boards.

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