Governance failures in non-profit investment programs rarely originate in a single decision. More often, they accumulate through a series of individually sound choices that gradually become disconnected from one another. Several years (and one or two investment committee rotations) later, the institution may find it difficult to reconstruct why the portfolio holds what it holds.

In the first paper of this series, we explored the tension between purpose and performance and the challenges non-profits face in designing and overseeing investment programs across multiple investment pools. In the second paper, we examined a specific dimension of that challenge: the portfolio construction gap, or the distance between the portfolio as set out in the Investment Policy Statement and the portfolio actually implemented through time. We noted
that this gap arises from mismatches in data, governance, and operational realities, and that these factors tend to reinforce one another.

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