As a trustee, you are responsible for devising an investment strategy that will secure your members' pension in the decades to come. This does not mean deciding on whether to buy specific stocks and bonds; that is the investment manager's task. The board's task is to provide the structure necessary to produce the investment outcomes sought by the fund, within the defined boundaries. There are three key ingredients for this structure: a set of sound investment beliefs, a clear investment process and an appropriate investment organization. In Part II, we connect the fund and board domains with the investment domain. Part II builds on the foundation of Part I but can be read separately.

Part II Topics Include:

• Key concepts in investing, enabling an understanding of the most important concepts;
• Recognizing how portfolio construction builds on risk premiums, also here distinguishing the key building blocks from the add-ons;
• Investment beliefs and how to think about and use them in the investment process;
• The structure and key building blocks of the investment management process;
• Different ways of organizing the investment management process—their pros, cons and the way they fit in with beliefs—and the nature of the investment challenges facing the fund.

CONTRIBUTION OF THIS PART TO INVESTMENT EXCELLENCE

Part II directs attention to the things that lay the groundwork when it comes to designing the investments. This groundwork is often taken for granted, or as part of the standard investment body of knowledge, but it is hard to overestimate its significance. Small changes in interpretation or implicit assumptions on investment choices have significant effects on long-term results. Once established, it will be hard to change. In terms of excellence, it pays off to offer a lot of attention to the design. By having a shared understanding of what matters most in investing and working from deeply felt investment beliefs, a fund will remove a lot of noise from the table when it comes to execution. By carefully thinking about the investment process and the investment model, the most important drivers of the long-term outcome of the fund will be determined, including the important question of the level of delegation to staff or investment managers. Therefore, the contribution to excellence of this part is that it pays to invest time and governance budget to the design or redesign of the fund.