investment-policy
Investment Policy Statement Construction
Purpose
Guide the construction of comprehensive Investment Policy Statements (IPS) that govern all investment decisions. This skill covers return objective setting, risk tolerance assessment, constraint identification, asset allocation policy, and ongoing review frameworks.
Layer
5 — Policy & Planning
Direction
prospective
When to Use
- Building an investment policy statement for an individual, endowment, or foundation
- Defining return objectives (nominal and real) based on future liabilities or spending needs
- Assessing risk tolerance by reconciling financial capacity with psychological comfort
- Setting constraints across liquidity, legal/regulatory, time horizon, tax, and unique circumstances
- Establishing portfolio guidelines including asset allocation ranges and rebalancing triggers
- Selecting benchmarks and defining manager evaluation criteria
- Scheduling periodic IPS and performance reviews
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