How evolving your governance can unlock stronger results
With increasing uncertainty and market complexity putting decision makers under mounting pressure, governance can shine through as a tool for potentially gaining a competitive edge.
Balancing investor risks, returns and reputational requirements has become an increasingly complex challenge for asset owners. Those responsible are all too often under pressure to make the right decisions with less time than they need to do so.
Many organizations underestimate the true value of a strong investment governance framework and culture, but in an environment where uncertainty is becoming the norm, not the exception, there is a growing awareness of and concern around the risks that non-financial factors, like governance, pose to overall portfolio performance.
Findings from this year’s Large Asset Owner Barometer showed that complexity in governance is seen by many investors as the primary barrier to agile and efficient decision-making. The percentage of respondents citing governance as a significant or highly significant threat to AUM increased from 36% in 2024 to 49% in 2025[1].
Why good governance is key
What is good portfolio governance?
Optimizing your investment portfolio to access opportunities and mitigate risks is only one part of achieving your long-term objectives. Ensuring you have a robust operational structure and processes in place is essential to your organization’s ability to navigate good times and bad.
Having a strong governance framework can help streamline your decision-making and potentially give you an important advantage when investing. This means delegating tasks to experienced, specialist teams either internally or externally, whilst maintaining clear reporting lines, forming the base from which you can build out your strategy and portfolio.
Good governance should help you:
- Set an optimal investment strategy that takes into account the unique factors affecting your organization.
- Stay on top of market movements that affect portfolio allocations and react accordingly.
- Monitor interest rate and inflation risks that can erode long-term investment returns.
- Identify operational dangers, such as trade errors and liquidity traps, with the aim of reducing these risks.
What we call a “governance premium” helps you remain confident about how your investment portfolio will behave, even in the toughest market conditions.
A governance premium helps our clients’ access timely information, respond quickly, and make effective decisions. This allows them to manage risk and pursue emerging opportunities. Good governance underpins everything we do.
President, Investments and Retirement
Taking control of your portfolio
Over the past 15 years we have seen how strong investment governance can improve outcomes and keep you focused on your objectives, no matter the market conditions.
Global events such as the financial crisis of 2007-09, the COVID-19 pandemic, and the market volatility experienced in 2025 all offer great examples of how a robust governance framework can help you navigate the most difficult periods.
Better governance is about giving you control over your investment portfolio and strategy. We have identified some key factors that can influence the strength of your investment governance.
Key steps for a good governance investment process
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Setting your objectivesThe first step is to be clear on what you are trying to achieve. Expressing this clearly will help you build a governance structure that steers in this direction.
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Designing your investment strategyOnce you know your desired end destination, you can begin planning the journey. Your investment strategy should reflect your objective(s) with appropriate levels of diversification and complexity.
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Implementing your investment strategyYou may want to ask yourself questions such as “how much will you do in house and how much will you outsource?”, “will you liaise directly with asset managers or will you employ third party specialists?” and “how will you maintain effective oversight of your providers?”.
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Designing your portfolioUnderstanding how different strategies, asset classes and markets interact with each other will help you construct an effective and diversified portfolio.
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Asset allocationAsset allocation is one of the most important decisions an investor makes. A thorough assessment of risks is critical to constructing a portfolio that seeks to meet your objectives, while also being positioned to capitalize on opportunities and mitigate unforeseen risks in a timely manner.
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Asset manager research and selectionResearching and selecting asset managers is a specialist skillset requiring significant resources. Even the world’s largest sovereign wealth funds rely wholly or partly on specialist research providers. Operational due diligence is also a specialist skillset which again almost all institutional investors tend to outsource to specialist providers.
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Rebalancing cashflow managementSetting clear policies on rebalancing your portfolio to a set asset allocation plan will help manage inflows and outflows, and help you to keep a disciplined, long-term approach through difficult times.
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Ensuring regulatory complianceHaving a clear plan, established processes and reliable reporting lines will help meet any regulatory requirements, ensuring transparency and accountability.
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Managing your risksEfficient and effective oversight requires clear reporting lines and regular, clear and direct communications with asset managers and other providers. This will help you identify, understand and manage risks as and when they emerge.
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Monitoring and reportingPerhaps the most resource intensive activities in the investment process are monitoring of portfolios and managers and reporting to all stakeholders on all activities. It's critical to have the appropriate resources and infrastructure to do this effectively, otherwise stakeholders will not feel confidence in the investment process.
