As mutual fund governance continues to evolve, selecting the right trustees is more important than ever. With over two decades of experience collaborating with well-regarded fund boards, we have identified some trends to consider when choosing your next trustee.

• Financial, Risk, and Regulatory Oversight – Trustees face increased regulatory demands for transparency and accountability. They must be aware of new compliance standards and proactively address risks related to issues such as liquidity and derivatives exposures. Qualified financial experts remain in high demand to bolster fund boards’ knowledge and understanding of complex financial statements and reporting requirements, as well as provide leadership potential for audit committees.

• Demand for Specialized Expertise – Today’s trustees require skills beyond traditional oversight. Investment products on fund platforms continue to grow in variety and complexity. To respond, boards need to add the right mix of trustees who bring functional expertise to the discussion in the boardroom. Areas of specialized skills and talents may include investments (both traditional and alternative); operational oversight; and knowledge of products and distribution platforms. These industry experts also help boards envision and prepare for “what’s coming around the corner.”

• Technological Knowledge – The use of technology is growing in all aspects of the fund industry—such as in the areas of investment process, financial and/or operational audits, and customer interface applications. Trustees must understand how technology is being utilized and assess its effectiveness. Oversight of service providers is also critical to consider any possible risks to delivery of services (such as a cyber-attack or leak of sensitive personal data). Boards have recruited technology expertise to keep up with these trends. 

• Fiduciary Responsibility and Accountability – Shareholders are now more engaged and vocal about their preferences and expectations. For mutual fund boards, trustees must understand the mindset of and role as a fiduciary advocating on behalf of those shareholders. This includes the responsibility to ensure clarity and transparency regarding fund strategies and performance. 

Trustee Search Tips

Recruiting mutual fund trustees has become highly competitive and great talent moves quickly! Based upon the most successful processes and outcomes we have witnessed, here are some recommendations for your next search:

• Start Yesterday – Effective boards recruit before an upcoming retirement. By developing a candidate pipeline well in advance of departures, boards are better able to manage transitions, provide useful overlap of trustees, and ensure effective on-boarding activities.

• Failing to Plan is Planning to Fail – Aim to recruit trustees with leadership potential. Avoiding succession planning may lead to future issues in board leadership.

• Add What You Need; Not What You Lost – With retirements, focus on current board needs and goals while recruiting new trustees. Open seats afford boards the chance to enhance skills and refresh in a non-disruptive fashion. Take advantage of that opportunity.

• Conflict Free – As always, and as soon as possible, it is critical to carefully select and ensure that potential trustees are truly independent and free from any conflict of interest.

• Diversity Matters: Prioritize Talent Over Title – Successful boards have a true mix of talents and abilities. They benefit greatly from the recruitment of a broad array of C-suite and senior leadership professionals with a variety of functional backgrounds and skills. Boards continue to work to capture diversity of thought and experiences to achieve a goal of building a more inclusive and representative culture.

The right trustees can future proof a board and strengthen its foundation. We are here to help you navigate these trends and recruit trustees who will add lasting value.

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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services. Maryann Bovich is Co-Head of the firm’s Asset Management practice and Head of the Mutual Fund Trustee practice. 

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon Russell S. Reynolds, Jr. In 2017, the firm expanded its capabilities in Asset Management through the addition of Higdon Partners. Over the past 30 years, the firm has conducted thousands of projects for Boards and CEOs at public, private equity owned, and family-owned businesses across a range of industries including asset management, consumer markets and enterprises, financial services, healthcare, industrial, marketing and digital, and technology. To learn more about RSR Partners, click here.

Grateful. Thankful. Optimistic.

Given the turmoil in the world around us, we can’t help but be more reflective and thankful at this time of year. We are grateful for family and the relationships in our lives. We are thankful for our wonderful clients and those candidates with whom we have partnered. We are optimistic about the new year ahead of us.

As another successful year in search concludes and we look back on 2023, we are sharing below some observations made during the course of our work. We always welcome a conversation with you whether it’s a quick hello or to discuss any specific needs of your organization. Our team looks forward to staying in touch in 2024!

ENDOWMENTS, FOUNDATIONS, AND OCIOs

• Changing of the Guard – After three decades recruiting within the E&F community, it’s hard not to get the sense that the pioneers of the E&F approach are stepping back, and the voice of a next and very capable generation is being heard.
• OCIO Search – The OCIO market has become highly competitive and the ascent of the OCIO search firm as a critical gatekeeper in the space should not be ignored.
• New Territory – Indexing and passive beta are entering the lexicon and finding a home on the mainstream range as credible vehicles for investment.
• Generalist Model – Many clients are adopting generalist models for varied reasons, including better aligning the team with market opportunities – and also with GPs who more and more are blurring lines between traditional asset classes.

FAMILY OFFICES

• Dynamic Market – There has been robust activity with new offices spawning daily and established offices upgrading talent continually.
• Sophisticated Investment Platforms –There is an increasing focus on buying private operating businesses, thus making family offices the biggest competitors to middle market buyout firms.
• CPAs – The demand for top quality financial talent is increasing but CPAs are in short supply.
• Cohesion – A top of mind discussion in many offices is cohesion – how do you keep family generations together and focused on common goals?

MUTUAL FUND BOARDS

• Targeted Expertise – Given the variety and complexity of investment products on fund platforms, boards have a continual need for qualified financial experts and trustees with broad investment experience.
• Strategic thinkers – With the industry undergoing consolidation and experiencing increased regulation, fund boards are looking for strategic thinkers and proven investment leaders to help boards envision and prepare for “what’s coming around the corner.”
• Diversity –Boards continue to work to achieve a goal of building a more inclusive culture and encouraging diversity of background, experience, and thought in the boardroom.
• On-boarding – Mandatory retirements continue to create a dynamic recruiting environment. As boards think strategically about seamless transitions, trustees are being recruited earlier and are provided broader educational programs and formal orientations to assist with on-boarding.

OPERATIONS

• Upgrades – Clients continue to invest heavily in upgrading operational functions to better integrate workflow with the investment process – leadership roles as well as portfolio analytics, risk, and operational due diligence capabilities.
• Forward Thinking – Senior operations roles require a strategic mindset and a comprehensive understanding of investment strategy to better support investment decision making.
• Range – COOs today must be able to deal with a greater range of business, regulatory, and cyber/technology related issues.

INVESTMENT/WEALTH MANAGEMENT

• Client Portfolio Managers – Firms are investing in talent with a blend of client DNA and demonstrated investment acumen for an integrated sales/client service role, as well as proxy for the CIO and investment teams.
• Bench strength – Our clients continue to experience tremendous demand for bench strength, perhaps a lingering effect of the great resignation.
• Analytics & Digital Technology – Distribution and marketing functions are transforming through enhanced use of data analytics and technology, now seen as critical components to a successful sales and client service effort to grow and maintain assets.

REPRESENTATIVE SEARCH WORK