by Bob Jacksha, Chief Financial Officer
The process used to make investments is broadly outlined in the Board of Trustees’ Investment Policy Statement (IPS). The IPS includes an allocation plan with targets and limits for asset classes (stocks, bonds, real estate, etc.). The allocation employs a variety of assets with the goal of structuring a well-diversified portfolio to reduce the volatility of returns. In allocating these assets, we ask two fundamental questions: Should we invest in active management or use a passive index, such as the Dow Jones or S&P 500 index? Should we hire an outside manager or manage the investments internally?
Where we believe active management can add value, we employ it. If not, we invest in a passive index. Where we have the staff resources to properly invest in an asset class, we do so internally, which is the most cost-effective choice. Where we do not have the resources, we hire external managers.
When choosing external managers and consulting firms, we subject them to a rigorous due diligence process that includes written questionnaires, meetings, background, and reference checks. All managers and consultants must be approved at a meeting of the Staff Selection Committee, which includes various members of the ERB Investment staff.
We and our consultants continue monitoring manager activities on an ongoing basis. This includes reviewing documents and periodic in-person meetings to ensure contractual compliance and acceptable performance. The process is time and resource intensive, but the goal is to deliver the best results possible for the ERB fund.
You may find our investment policies and related information in the Investment section of the website.