Institutional Investors

Institutional clients of Falcons Rock Investment Counsel may include qualified retirement plans, trusts, foundations, endowments, and charitable organizations. The Investment Committees of these entities have a fiduciary duty to prudently invest assets for the benefit of others. Guidelines for trustees have been developed over the years via two pieces of legislation: the Employee Retirement Income Security Act (ERISA) enacted in 1974, and the Uniform Prudent Investor Act (UPIA) Restatement (Third) of Trusts introduced in 1992. In 1994, the National Conference of Commissioners on State Laws approved a model state statute incorporating the principals of the UPIA, and most states have now enacted some version of the Prudent Investor Rule.

It is now recognized that the process used to make investment decisions leads to fiduciary protection for trustees. The determination of prudence centers on fiduciary conduct, not portfolio performance. The Uniform Code of Fiduciary Conducts broadly suggests:

1. Have written investment policies, and document the investment decision making process.
2. Diversify assets with regard to specific risk/return objectives of participants and beneficiaries.
3. Use "product experts" to help make investment decisions. Delegation is permitted, encouraged, and in some cases, required.
4. Control investment expenses, and ensure "best execution" of investment transactions.
5. Monitor the activities of all money managers and service providers.
6. Avoid all conflicts of interest.


The variety of institutional investors advised by Falcons Rock dictate a continuity of process, with special consideration given to each unique situation. For example:

• A Defined Benefit Pension Plan analysis will require a review of participant demographics and actuarial valuation.
• A 401(k) plan analysis will require a broad analysis of service provider capabilities/investment restrictions.
• A Foundation or Endowment Fund will require an analysis of donor requirements, securities restrictions, and political issues.

Specific investment consulting services available include:

• Fiduciary Investment Compliance Review
• In accordance with the Uniform Code of Fiduciary Conduct
• Review of plan or trust documents, and Summary Plan Description
• Review of Investment Policy Statement (IPS)
• Review of procedures for selecting "prudent experts"
• Review control procedures
• Review of costs and fees
• Review of Section 404(c) status for defined contribution plans
• Review actuarial funding status for defined benefit plans

• Analysis of Current Position
• Evaluate existing Investment Policy Statements
• Structural analysis of current investment holdings, and "back-test" calculation of portfolio returns
• Review of participant demographics and actuarial valuation (if defined benefit plan), cash flows, client investment goals, income requirements, return expectations, and risk tolerance
• Evaluate special considerations, such as securities restrictions, donor requirements, custodian mandates, political/family issues

• Design Optimal Portfolio
• Propose optimal asset allocation strategies based on capital markets projections and client objectives
• Address strategic and tactical investment strategies
• Advise on investment alternatives and modern portfolio concepts
• Propose optimal investment menu for participant-directed plans

• Formalize Investment Policy
• Prepare written Investment Policy Statement (IPS)
• Outline investment objectives, investment guidelines, securities guidelines, and procedures for selecting and monitoring money managers
• Establish expectations of risk and return of the portfolio, and performance measurement standards for money managers
• Guidelines of fiduciary requirements under ERISA and the Uniform Prudent Investor Act Rules

• Implementation
• Search for money managers based on IPS guidelines
• Alternative money manager structures proposed
• Money manager fees and account minimums negotiated
• Assist in search for retirement plan service providers
• Custody services secured
• Coordinate and supervise implementation of the IPS

• Ongoing Supervision
• Comprehensive quarterly reports to include performance measurement and comparative analysis of overall portfolio and money managers, as outlined in the IPS
• Personal presentation of reports to investment committee
• Discussion and documentation of changing plan parameters, tactical asset allocation strategies, and portfolio rebalancing
• Execution of appropriate changes