A Cornerstone of Good Governance
An investment policy statement or IPS is a guidance document that outlines your investment strategy and governs all investment activities. A comprehensive IPS addresses a wide range of investment policies:
- Investment objectives and the time horizon
- Risk tolerance and liquidity requirements
- The long-term target rate of return for the portfolio, and the expected range of returns over different time periods
- Strategic asset allocation and permissible ranges for each asset class
- Relevant performance benchmarks and indices for individual asset classes and the portfolio as a whole
- Selection and retention criteria for securities
- Investment monitoring and control procedures, including the investment rebalancing process
- Duties and responsibilities of investors, trustees, foundation directors, investment managers and other participating parties
- Investment management fees
- Assumptions used for inflation, rates of return, correlation and standard deviation.
A complete IPS is a cornerstone of prudent investment management and not-for-profit governance. Weigh House Investor Consultants help investors, foundations, endowments and trust funds define and document their investment strategies in comprehensive investment policy statements.
The Investment Manager’s Responsibilities
The investment manager is responsible for guiding the investor through a disciplined investment process. As a fiduciary to the investor, the primary responsibilities are to:
- Prepare and maintain the investment policy statement
- Diversify the portfolio by selecting asset classes with different expected risk return profiles
- Monitor asset allocation and rebalance the portfolio in accordance with the strategic asset mix
- Identify prudent investment options for the investor’s consideration
- Control and account for investment expenses
- Monitor and supervise all vendors and investments
- Avoid prohibited transactions and conflicts of interest
