Investment
Why the investment policy statement comes first
Committees that write policy before selecting managers make calmer decisions in volatile quarters. The document is the discipline.
· 7 min read
An investment policy statement converts intention into instruction. It records objectives, constraints, liquidity requirements, permitted asset classes and the rules for review.
Its real value appears during drawdowns. When markets fall, the committee is not deciding what to believe; it is checking behaviour against a document it wrote in calmer conditions.
Good policy statements are short and specific. Ranges rather than point targets, named review cadences, and an explicit statement of what would trigger a change in allocation.
Review annually, amend deliberately, and keep a version history. The history is often more instructive than the current draft.