Development/Review of Investment

Under ERISA, “Every employee benefit plan shall provide a procedure for establishing and carrying out a funding policy…”  “The Trustee must give reasonably careful consideration to both the formulation and the implementation of an appropriate investment strategy, with investments to be selected and reviewed in a manner reasonably appropriate to the strategy.”

Investment committees for foundations and endowments are held to similar standards under various IRS regulations and state legislation.

The Investment Policy Statement serves as a tool for prudent investment management and communication.  The document should clearly and explicitly state the investment objectives and policy guidelines established to achieve those objectives.  It provides for a distinction of responsibilities for all parties serving an investment vehicle and protects those parties from gray areas or poorly described expectations and can help avoid the possibility of unauthorized activities.  The document establishes useful guidelines to the investment manager that are conducive to the client’s goals as well as to the realities of investments and markets.  While the former is based on the client’s long-term objectives and tolerance for risk, it is the responsibility of the investment manager to understand and fully explain to the client the investments and markets.  A well-developed policy is determined by a carefully developed mutual understanding of both dimensions. 

Generally, the statement should describe, with a high degree of clarity:

	Investment Portfolio’s Mission
	Investment Goals & Objectives
	Risk tolerance of Organization
	Control Procedures
	Investment Structure
	Performance evaluation and monitoring

Portfolio Evaluations, Inc. assists clients developing investment policy statements and/or reviewing documents.