Return Of The Investment Steward

Over the past several months, the current global financial crisis has been an emotionally trying and painful experience for anyone who is responsible for the oversight of large pools of capital for the benefit of others — foundations, endowments, pension plans and trustees of private trusts to name but a few. We refer to these individuals as “Investment Stewards”.

Additionally, the speed and severity of the asset declines, together with the underlying structural issues in the global credit markets have caused many Stewards to reconsider their true tolerance for risk and rapidly shift their portfolios to only the safest of investments. There have also been many media stories about large public foundations, endowments and pension plans that are now facing seriously critical funding issues. Clearly in the current economic environment, ‘safety trumps growth’ but we believe that Stewards who oversee true long-term needs will eventually need to decide upon prudent portfolio structures that best suit the unique investment objectives and risk tolerances of the wealth that has been entrusted to them.

Investment Stewards who are weathering this global investment storm are those who have adhered to a set of fiduciary practices that have been in existence for many decades. They are the Stewards who only a few years ago were being pressured by their beneficiaries and colleagues to “boost portfolio returns” by engaging in higher risk investment strategies but who had the tenacity to abide by their principles. These Stewards may have endured excessive ridicule, or in some cases, lost their board/ trustee positions during the last bull market for their conservative investment stance. However, these Stewards are now finding that their colleagues, beneficiaries and former board/trustee members are now seeking their advice on how to manage through the current market turmoil.

As a result, we believe that the focus in the oversight of wealth will quickly shift back to the standards of years ago in which phrases such as “Preservation of Capital” and “Responsible Growth” were core to the Investment Steward relationship with their beneficiaries — in other words, there will be a “Return of the Investment Steward”.

We’ve written an article, the purpose of which is not to speculate as to the short-term future direction of global capital markets, but to share our philosophical beliefs about prudent and proven fiduciary practices that have stood the test of time, through both bull and bear markets, in the successful navigation of large pools of capital for the benefits of others.