Efficient and effective mutual fund Board meetings are vital to the success of a mutual fund family, no matter their size and/or complexity. Over time, meeting formats and structures evolve, particularly in recent years, as new rules and regulations have fundamentally altered the role of the Board. What was once a meeting primarily focused on investment management has become a more equally-weighted meeting between advisor oversight and regulatory matters. As we have observed and interacted with Boards, we believe there is an opportunity for fund Boards to review their approach with the goal of better meetings.
Preparing an Effective Agenda
Our first recommendation is to review the agenda and put the items in the order in which they will actually be covered. Along the way, the attorneys, paralegals, and others involved in this process, forgot that Board members typically do not think in the same manner as '40 Act attorneys, who typically organize the agenda into the following order:
1. Approval of the Minutes
2. Report of the Advisor
3. Committee Reports
4. Quarterly Matters for Review and Approval
5. Annual Matters for Review and Approval
6. Other Business
7. Report of Counsel or Regulatory Update
8. Scheduling of Future Board Meetings
There are some variations, but we've seen this same general approach used by internal and external counsels, and it makes sense from their perspective. Items are grouped based on various '40 Act rules and serve as a helpful reminder of the general content of each meeting. However, we don't believe this approach factors in what makes sense for the Board. Our belief is that Boards would prefer to focus on the most important items first (so things don't get short-changed at the end), focus on exceptions rather than the routine, and have the meeting organized in such a manner that they can interact with the key presenters and cover everything in the event of limited time. For example, the chief investment officer's primary function is to direct the investments of the funds...not necessarily to sit through the report of the Treasurer on the process for finalizing the semi-annual report.
We recommend categorizing the agenda items. Generally speaking, meetings tend to break down into four broad categories, which might result in the agenda being reorganized as follows:
1. Investment Management
a. Economic and Market Review
b. Individual Fund Performance Discussion (perhaps a focused group of funds at each meeting for larger complexes)
c. Any Proposed Changes to Investment Strategy
2. Product Management
a. Sales and Marketing Report
b. Discussions Surrounding New Products
3. Legal and Compliance
a. Approval of Minutes, Compliance Report, Code of Ethics Reports and CCO Report
b. Policy and Procedure Changes
c. Committee Reports
d. Counsel's Regulatory Update
a. Review of the Prior Meeting's Follow-Ups
b. Performance Scorecards from Service Providers
c. Report of the Treasurer
d. Authorized Signers
e. Future Meeting Dates
Everything fits into one of these categories and, almost without fail, it will be one or two individuals responsible for presenting the various items within these sections. Each major section should require an executive summary from the person primarily responsible for the section. So, the CIO would provide the summary for the Investment Management section, the head of Product Management for the Product Management section, the CCO for the Legal and Compliance section, and a representative from the administration team for the Operations section.
To further improve the efficiency for the attendees, arrange the items within the section so you are not shifting from one presenter to another. In this approach, there is no accounting for what is a quarterly matter or an annual matter - there are just agenda items to be discussed for that section. We even change the format of the actual agenda to note not only the item and who is presenting, but also whether or not there are any exceptions (good or bad), what section in the book the supporting materials can be found, and whether or not a vote is required. Your new agenda might emerge as:
Obviously, a change like this requires that everyone maintain a solid governance calendar for the fund complex so the Board is assured nothing is missed. Further, it is still a good practice to review last year's, and last quarter's, book to serve as another layer of confirmation as to the agenda items.
Timing the Meeting
Another important element is your meeting timing. Many Boards employ a structure involving a morning start (usually 8:30 or 9:00, depending on committee meetings), and you might need to account for travel time. In most cases, particularly with small to mid-size fund groups, Boards are able to conclude around 2:00 pm and typically work through lunch. A concern is whether or not the Board had the full "energy" in the afternoon they did at the start of the meeting, so managing time becomes vital.
We have seen a number of approaches to the structure and timing of the meeting including, but not limited to, the following:
* Everything addressed in a single day
* The meeting split over two days
* A late afternoon start on day one with a dinner and an early start on day two
* Separating certain longer activities into their own meetings
Perhaps more important than the overarching structure is what happens once you convene the meeting. As noted above, you might reach the conclusion that the "single day" approach may no longer work. If you do not already do so, consider adding a pre-meeting teleconference the week before each meeting. This call might include the Trustees, counsel and the CCO. The purpose is to review the materials and raise any additional questions, issues, or requests for additional information in an effort to make the in-person meeting more efficient. You can better leverage these calls as a forum for handling some of the more routine matters that don't require an in-person meeting. While it might lengthen the call, it can add focus to a limited number of key matters to the in-person meeting. There certainly are implications to this approach:
* Impact on trustee compensation
* Minutes would be required for the "formal" part of this telephonic meeting.
* Organization of materials
One recommendation is to leverage the pre-meeting call for the general overview of the economy and the funds' performance, as this is already at the beginning of many agendas. You could then focus the in-person meeting on a particular fund or set of funds each quarter. You could probably accomplish this with roughly an extra hour or so of telephone time and reduce the time required at the in-person meetings.
An alternative approach we have seen to be quite effective is gathering for a working dinner (covering an educational topic or advisor report) on day one and an early start on day two. If your Board has extensive travel required, or the meetings tend to run six hours or more, this may be an effective strategy for being efficient, yet still maintain good energy levels. You might also consider having a planning session before the dinner (similar to the pre-call) that paves the way for an efficient meeting the next day. Also, take frequent breaks during the meeting.
Preparing for an Effective Meeting
Finally, there are some additional steps you can take to make the meetings more effective:
* Attempt to have as much business as possible resolved prior to the meeting
* Give Board members, and not just management, assignments between meetings
* Circulate minutes earlier
* Circulate follow-up items, reports, or memos earlier
* Time materials dissemination
* Apply technology to make distributed information as meaningful and useful as possible
* Encourage more communication, in both directions, between management and trustees
Whether or not you decide to implement any of these steps, do have a discussion with your Board(s) and work with them to define the content of the materials and the organization of the meeting. The '40 Act provides the guidance about what must (and should) be covered, but it does not dictate how this must be done. Take the time to work with your service provider, counsel and chairperson to really come up with something that will work better for everyone. You may find your meetings are more efficient and focused than ever before.
R. Jeffrey Young has worked with numerous Boards of Trustees for mutual fund families.