In the world of finance and investing, having a well-defined investment policy statement (IPS) is crucial for achieving long-term financial goals. An IPS serves as a strategic guide for individuals and institutions, providing a framework for making informed investment decisions. It outlines the investment objectives, risk tolerance, asset allocation, and other important guidelines that help investors stay focused and disciplined in their investment approach.
TRS performs asset-liabilities studies periodically to set a strategic asset allocation. Asset class performance is monitored through regular evaluations to ensure optimal portfolio performance. This highlights the significance of an IPS in guiding investment decisions based on the performance of different asset classes.
By a unanimous vote Thursday, members approved the investment policy prioritizing four investment principles—low-cost investment options, open and transparent communication, diversification, and alignment with the investor's goals and risk tolerance. These principles ensure that the investment strategy is cost-effective, well-communicated, diversified, and aligned with the investor's needs.
Our November issue of the Investment Management Update covers regulatory developments from the third quarter of 2023 impacting the investment management industry. This emphasizes the need for an IPS to adapt to changing regulations and stay compliant with the evolving financial landscape.
Measured against the latest long-term return assumptions, are your portfolios still on track? Each year, more than 60 investment professionals conduct thorough evaluations to assess the performance of portfolios and make necessary adjustments. An IPS serves as a benchmark to evaluate portfolio performance and make informed decisions to keep investments on track.
In 2021, the board approved a revised Investment Policy Statement that formalized its commitment to diverse managers. It also set an official mandate to actively seek opportunities with minority-owned and women-owned investment firms. This highlights the role of an IPS in promoting diversity and inclusion in investment management.
State and local pension funds collectively hold more than $5 trillion in assets to pay for promised benefits to workers and retirees. An IPS provides these funds with clear investment guidelines to protect and grow their assets, ensuring the long-term sustainability of pension benefits.
Once created, an investment policy statement can help contextualize the client's spending outlook. Ultimately, the document enables OCIOs (Outsourced Chief Investment Officers) to provide a full understanding of the client's financial goals, risk tolerance, and investment objectives. An IPS acts as a roadmap for OCIOs to develop tailored investment strategies aligned with the client's unique needs.
On 28 November 2023, the UK's Financial Conduct Authority (FCA) unveiled its Policy Statement PS 23/16 (Policy Statement), which sets out regulatory guidelines for investment firms. Compliance with such regulatory policies is crucial for investment firms, and an IPS serves as a tool to ensure adherence to these guidelines.
An outside perspective can be invaluable. In today's challenging and complex economic environment, we believe prudent investment advice is vital to navigate uncertainties and achieve financial success. An IPS provides a structured approach for seeking expert advice and making informed investment decisions based on a well-defined strategy.
In conclusion, an investment policy statement is a critical tool for investors to formulate a strategic investment approach, adapt to changing regulations, promote diversity, protect pension funds, and seek professional advice. By following the guidelines outlined in an IPS, individuals and institutions can enhance their chances of achieving their long-term financial goals and weathering market uncertainties.
