This glossary is designed as a working reference for nonprofit Investment Committee members, CFOs of endowments and foundations, and anyone who is tasked with overseeing an institutional investment portfolio.
Definitions are intentionally tailored to real-world usage in the institutional investment industry. Some terms — like ERISA — are presented through a narrow, governance-relevant lens, not an exhaustive legal interpretation. Where helpful, we include references to governing rules, common practice, or industry norms.
Have a term you’d like us to add or clarify? Reach out. This glossary continues to evolve with Leita’s work.
Leita’s word for “soft skills.” The interpersonal, cultural, and decision-making tendencies that shape how a Board or Investment Committee interacts and how investment partners like OCIOs or non-discretionary investment consultants engage with them.
In a nonprofit organization, the Board of Directors is the governing body responsible for fiduciary oversight, strategic direction, and high-level decision-making. The board often delegates investment oversight to a designated Investment Committee but retains ultimate responsibility for the organization’s financial stewardship and has a fiduciary duty to the organization.
Related terms: Investment Committee, Fiduciary Duty
Resource: BoardSource: Board Responsibilities and Structures – FAQs
DDQ is an acronym for “Due Diligence Questionnaire.” It is a standardized set of questions used to gather key information about an investment provider’s structure, strategy, and capabilities — supporting more consistent and informed evaluations. At Leita, the DDQ is maintained as a living document and updated periodically by OCIOs to reflect firm-level data over time.
Related terms: RFP
Resource: Read about Leita’s DDQ
The duty of care is one of the three core responsibilities of a fiduciary, alongside the duties of loyalty and obedience.
This duty requires fiduciaries to make informed, prudent decisions — applying reasonable diligence and independent judgment when overseeing investment matters — and engaging experts to fill in knowledge gaps.
Related terms: Fiduciary Duty, Duty of Loyalty, Duty of Obedience
Resource: Grant Thornton: Three Legal Duties Every Board Member Must Follow
The duty of loyalty is one of the three core responsibilities of a fiduciary, along with duty of care and duty of obedience.
The duty of loyalty requires trustees to place the interests of the organization above their own and to disclose and neutralize potential conflicts of interest. Leita refers to this as the “don’t hire yourself” rule, although recusal from decision making is also an acceptable practice in nonprofits.
Related terms: Fiduciary Duty, Duty of Care, Duty of Obedience
Resource: Grant Thornton: Three Legal Duties Every Board Member Must Follow
The duty of obedience is one of the three core responsibilities of a fiduciary, alongside the duties of loyalty and care.
This duty requires fiduciaries to ensure the organization’s actions and investments align with its stated mission and legal purpose. That includes following governing documents, respecting donor intent, and staying within applicable laws and regulations.
Related terms: Fiduciary Duty, Duty of Loyalty, Duty of Care
Resource: Grant Thornton: Three Legal Duties Every Board Member Must Follow
An investment approach popularized by Yale’s David Swensen, the endowment model emphasizes long-term, growth-oriented portfolios with meaningful allocations to alternative assets like private equity, hedge funds, and real assets. Designed for institutions with multi-decade horizons, it relies on diversification, manager selection, and an acceptance of illiquidity in pursuit of higher real returns. While the model has evolved over time, it continues to shape how many endowments and foundations think about risk, access, and long-term value.
Resource: David Swensen’s book, Pioneering Portfolio Management
Acronym for the “Employee Retirement Income Security Act” of 1974, which sets minimum standards for private-sector retirement plans. For institutional investors, ERISA introduces specific fiduciary duties, including the obligation to act prudently, diversify investments, and avoid conflicts of interest.
Related terms: ERISA Section 3(21), ERISA Section 3(38)
Resource: ERISA official site
A section of the Employee Retirement Income Security Act (“ERISA”) that defines a fiduciary who provides investment advice but does not have discretion to make investment decisions. When a non-discretionary investment consultant acts as a 3(21) fiduciary, they offer guidance — such as helping the Investment Committee develop the investment policy, set the strategic asset allocation, or evaluate portfolio-level risk — but the Committee retains final decision-making authority.
In many OCIO arrangements, the firm acts as a 3(21) fiduciary for advisory tasks and as a 3(38) fiduciary for implementation. Understanding where the OCIO has discretion — and where it does not — is an important part of fiduciary oversight.
Related terms: ERISA, ERISA Section 3(38)
Resource: ERISA official site
A section of the Employee Retirement Income Security Act (“ERISA”) that defines a fiduciary with full discretion over investment decisions. Often shortened to 3(38) and used colloquially to refer to the OCIO itself or the type of service the OCIO provides to the retirement plan.
While OCIOs working with retirement plans do serve in a discretionary capacity for certain activities, it’s important to note that not every responsibility of an OCIO is a 3(38) responsibility. In fact, OCIOs take on a mix of responsibilities under both ERISA Section 3(38) and 3(21). For example, an OCIO may act as a 3(38) manager when implementing investment decisions, but as a 3(21) advisor when working with the Investment Committee to develop the investment strategy.
Related terms: ERISA, ERISA Section 3(21)
Resource: ERISA official site
“ESG” is an acronym for Environmental, Social, and Governance, the three broad categories used to evaluate the sustainability and ethical impact of an investment. In institutional investing, ESG factors may be considered alongside traditional financial metrics to assess long-term risks and opportunities.
Related terms: Mission-Related Investing, Program-Related Investing
Resource: UNPRI Guide to Responsible Investing
A fiduciary is a person or organization legally and ethically responsible for acting in the best interest of another party. In the context of nonprofit investing, fiduciaries often include Board members, Investment Committee members, and OCIO firms. Fiduciaries are expected to exercise the duties of loyalty, care, and obedience — putting the organization’s interests ahead of their own.
The concept of fiduciary duty is ancient: it appears in the Code of Hammurabi, religious texts like the Bible (“no one can serve two masters”), and centuries of legal theory. It addresses a fundamental question in governance: how do you ensure that an agent makes decisions on behalf of a principal — not for personal gain, but for the benefit of the mission? The word itself is derived from the Latin fīdūciārius, “holding in trust, of a trustee, (of property) held on trust.”
Related terms: Fiduciary Duty, Duty of Loyalty, Duty of Care, Duty of Obedience
Resources: Michigan Bar Journal: Historical Perspective of Fiduciary
Fiduciary duty refers to the legal and ethical obligation of a person or organization to act in the best interest of another party — typically, a beneficiary or principal. In nonprofit investment governance, fiduciary duty underpins the responsibility of Boards, Investment Committees, and OCIOs to steward assets prudently, loyally, and in alignment with the organization’s mission.
Fiduciary duty is often broken into three components:
• Duty of Loyalty – avoid conflicts of interest
• Duty of Care – make informed, prudent decisions
• Duty of Obedience – adhere to mission and governing documents
Related terms: Fiduciary, Duty of Loyalty, Duty of Care, Duty of Obedience
Resource: Commonfund: Three Fundamental Duties of Nonprofit Boards
A subset of a Board of Directors responsible for overseeing investment strategy, manager selection, and policy implementation. May include outside experts who serve on the committee but not on the board itself.
Related terms: Board of Directors
A formal document that outlines an organization’s investment objectives, risk tolerance, asset allocation targets, and governance guidelines. It provides the framework for how investment decisions are made, monitored, and evaluated, and serves as a reference point for both the Investment Committee and the OCIO or advisor.
Related terms: OCIO, Investment Committee
Mission-related investing is often referred to by the acronym “MRI.” This is a style of investing that prioritizes both investment return potential and societal impact, usually in line with a non-profit’s mission statement.
For example, an ecology-focused non-profit might invest in assets that are expected to earn a market rate of return while furthering ecological goals like biodiversity or clean water.
MRI is about aligning investments with purpose, without sacrificing performance. MRI is often used as a contrast to Program-Related Investing, or “PRI.”
Related terms: ESG, Program-Related Investing
OCIO stands for for Outsourced Chief Investment Officer and is also referred to as Outsourced CIO. An investment firm hired to manage an organization’s investment portfolio under a discretionary mandate. Typically, OCIOs have discretion to make investment decisions without the explicit approval of the Investment Committee, so long as they operate within the guidelines set out in the Investment Policy Statement.
Related terms: Investment Committee, Investment Policy Statement
Resource: ocio.org: What is an OCIO?
An OCIO search consultant is a firm or advisor engaged to guide an Investment Committee through the selection of an OCIO or non-discretionary investment consultant. A search consultant’s role is to bring structure, objectivity, and deep market insight to the process — helping fiduciaries evaluate providers efficiently to select the right long-term partner. Search consultants often manage RFP processes, coordinate interviews, and provide comparative analysis. Leita Advisory serves as a search consultant to non-profits and other institutions.
Related terms: OCIO
A pacing model estimates future private equity commitments needed to reach or maintain a target allocation, recognizing that capital is called over years rather than invested upfront. Investment Committees rely on pacing models to manage liquidity during the investment period, avoid under- or over-allocation, and manage exposures across multiple funds and vintage years.
Program-Related Investing is often referred to by the acronym “PRI.” In contrast to Mission-Related Investing which expects a market rate of return, Program-related investments are often below-market-rate investments made by non-profits to support charitable work through investments, not just grants. An example is an affordable housing loan that is offered at a discount to interest rates at other lenders. The goal is to make a small profit while furthering an organization’s mission.
Unlike MRI, which is used in many different ways by investors and does not have a specific legal term, Program-related investments have a legal definition. In many cases, these investments are treated like grants.
Related terms: ESG, Mission-Related Investing
Resources: IRS Section 4944(c) Taxes on Investments Which Jeopardize Charitable Purpose – Exception for Program-Related Investments, IRS definition of Program-related investments
RFP is an acronym for “Request for Proposal.” In institutional investing, an RFP is a formal questionnaire used by Investment Committees or search consultants to collect detailed information from OCIO or investment consultant candidates. A typical RFP requests both quantitative and qualitative data — covering topics such as firm structure, investment philosophy, process, performance, and pricing.
Related terms: DDQ, OCIO Search Consultant
We do love our acronyms, and “SAA” is one that trips a lot of people up. SAA is an acronym for “Strategic Asset Allocation.” Asset allocation describes the mix of assets you own in an investment portfolio – think stocks, bonds, alternatives. Strategic implies longer-term positioning that doesn’t change much (or at all) depending on fluctuations in the markets.
Strategic asset allocation is the primary driver of institutional investment portfolios over long periods of time. Strategic asset allocation is typically defined in an Investment Policy Statement and serves as the foundation for how portfolios are built and rebalanced.
Related terms: Investment Policy Statement, Tactical Asset Allocation
In institutional investing, TAA is an acronym for “Tactical Asset Allocation.” It may also be called Dynamic Asset Allocation, or “DAA.” Asset allocation describes the mix of assets you own in an investment portfolio – think stocks, bonds, alternatives. Tactical implies shorter-term positioning that is affected by fluctuations in the markets.
For example, in 2020, high yield bond spreads were historically wide. When bond spreads narrow (or “tighten”), bonds make money. So investing more money in high yield bonds, knowing that spreads would eventually tighten, was a tactical move. Once the spreads tightened to a normal range, tactical investors moved money back out of high yield bonds.
Some OCIOs use tactical asset allocation to earn incremental return in total portfolios, and other OCIOs shy away from it. This is a differentiator in OCIO investment philosophy.
Related terms: Investment Policy Statement, Strategic Asset Allocation
TPA is an acronym for “Total Portfolio Approach.” TPA is an investment governance framework that emphasizes portfolio-level decision-making, allowing capital to be allocated based on risk, return, and liquidity contribution rather than fixed asset class targets. It seeks to overcome the limitations of traditional strategic asset allocation by enabling more dynamic oversight and reducing reliance on siloed investment buckets. While TPA doesn’t change what portfolios own overnight, it reframes how investment decisions are made and monitored.
Related terms: Strategic Asset Allocation
Resource: CAIA Association’s The Rise of Total Portfolio Approach
More from Leita: TPA: A Primer for Institutional Investors