03-23-2026
Regardless of your role within the investment management industry, you will almost certainly serve a client. These clients may include institutions that have entrusted their capital to you, pension plan beneficiaries who rely on management to receive their earned benefits, a life insurance company’s balance sheet that supports policy underwriting, or, in my case, Purdue University, which relies on prudent investment management to support a portion of their operating budget.
Sound ethical principles are at the core of the investment management industry, forming the foundation of trust between clients and those who serve them. Without this foundation, trust erodes. Reputation and capital can quickly fade.
As a chief investment officer managing Purdue’s endowment, I am a fiduciary. I have a legal and ethical responsibility to act exclusively in my client’s — the endowment’s — best interest. As a CFA charterholder, I also abide by the CFA Institute’s Code of Ethics and Standards of Professional Conduct. Combined with my fiduciary duties, these standards require loyalty, prudence, care, fair dealing and suitability of investments.
Another critical and less obvious concept under the CFA Code and Standards is “diligence and reasonable basis.” The CFA Institute Code of Ethics states that members and candidates must:
A few years ago, a peer — a fellow CIO managing another multi-billion-dollar pool of capital — called to share a direct investment opportunity in a private company raising a new round of capital. He noted the round would be 10x oversubscribed but mentioned an allocation could be made for Purdue’s endowment. The company, a prominent, successful technology firm, has a CEO with a reputation for never having a "down round," meaning every subsequent capital raise has been at a higher valuation than the last.
My peer connected me with the individual raising the round, who confirmed they would welcome Purdue. However, his next statement determined our participation level: “There is one catch. There is no diligence available. We are not opening the books. It is so oversubscribed that we don’t need to.”
I appreciated the opportunity, our network, and the brand strength that brought us the offer, but I politely declined. Since then, the company has continued to succeed with additional funding rounds, all at higher valuations.
Do I regret the decision to pass? Absolutely not.
Some investment prospects that do not align with one’s fiduciary duty will perform extremely well. No matter how convinced you are about the potential investment’s prospects, it never excuses the dereliction of your ethical responsibilities to your client, which include performing thorough due diligence and establishing a reasonable basis for all investment decisions.
David Cooper is the Chief Investment Officer of the Purdue Research Foundation and is responsible for overseeing investment assets totaling $7 billion including endowment, operating funds, and retirement assets for Purdue University and the Purdue Research Foundation. He serves as a Business Fellow at the Daniels School of Business. Cooper is a Chartered Financial Analyst (CFA) charterholder and a Chartered Alternative Investment Analyst (CAIA) designee.
