Apply the CFA Institute Code and Standards to the conduct of people who choose external managers

Manager selection is full of potential conflicts. Standard I(B) Independence and Objectivity warns against accepting gifts, travel or entertainment from managers seeking the mandate. Only modest items should be accepted, and anything that could reasonably be expected to compromise independence and objectivity must be declined. Standard VI(A) Disclosure of Conflicts requires revealing relationships such as a staff member's personal investment in, or family tie to, a candidate firm. Standard III(A) Loyalty, Prudence, and Care requires acting for the fund's beneficiaries, and Standard V(A) Diligence and Reasonable Basis requires thorough due diligence before hiring. Standard I(C) Misrepresentation applies when presenting candidates' results to the committee. The trap is excusing a gift because the decision was made on merit.