Resources - Investment Policy

Without formal policies, institutions tend to have only a loose aggregation of ideas and goals. The creation of a formal investment policy statement is crucial because it sets the framework that connects your financial and spending objectives to an official investment strategy. Written policy statements support the prudent-investor rule by clearly tying together funding and spending policies and the investment management strategy in a common sense approach, thus upholding responsibility.

The Importance of an Investment Policy Statement

  • Fulfills an investor’s greatest function: to set investment policy and implement guidelines
  • Negates "Monday Morning Quarterbacking" and provides continuity during committee turnover
  • Keeps investment process intact during periods of market upheaval
  • Takes emotions out of the game
  • Establishes asset allocation and rebalancing parameters
  • Helps to reassure donors of investment stewardship (foundations, endowments, etc.)

Components of an Investment Policy Statement

  • Purpose of statement and objectives
  • Risk Posture
    • Risk Tolerance
    • Time Horizon
  • Asset Allocation Policy
    • Asset Classes
    • Structure
    • Rebalancing
    • Returns
  • Investment and Security Guidelines
  • Control Procedures
    • Committee
    • Managers
    • Performance
    • Risk