Set out what good investment governance looks like and how governance shapes asset allocation decisions

Governance decides who makes which decisions and how they are held to account. Effective arrangements set clear long- and short-term objectives, allocate decision rights to those with the expertise to use them, lay down documented processes for developing, approving and implementing policy, report on progress, and review the whole structure periodically, for example through a governance audit. Typically the governing body approves the investment policy statement and strategic asset allocation, while staff or an outsourced manager handle implementation within ranges. Good governance also builds continuity so that the process survives turnover of committee members. The trap is letting a part-time committee make tactical calls it cannot monitor, or failing to document the rationale behind the strategic asset allocation.