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Investment Policy Statement (IPS)

An Investment Policy Statement (IPS) is a formal document outlining the investment goals, strategies, risk tolerance, and guidelines for managing an investment portfolio. It serves as a blueprint for portfolio managers and investors, ensuring that investment decisions align with the client’s objectives and risk profile. The IPS also includes information on asset allocation, benchmarks for performance, and the time horizon for the investment strategy.

Example

A wealth manager creates an IPS for a client, specifying that the portfolio should be 60% equities and 40% bonds, with a long-term investment horizon and a moderate risk tolerance.

Key points

• A formal document detailing investment goals, strategies, and risk tolerance.

• Guides portfolio management decisions and ensures alignment with client objectives.

• Includes asset allocation guidelines, performance benchmarks, and time horizons.

Quick Answers to Curious Questions

An IPS ensures that investment decisions align with the client’s objectives, risk tolerance, and time horizon, serving as a guide for portfolio managers.

It includes investment goals, asset allocation strategies, performance benchmarks, risk tolerance, and guidelines for managing the portfolio.

An IPS is created by a portfolio manager or financial advisor in collaboration with the investor, outlining their investment strategy and goals.