Chapter 21
Investment Policy Statements
I think I did pretty well, considering I started out with nothing but a bunch of blank paper.
—Steve Martin
Everyone who participates importantly in the management of a large investment portfolio should think of themselves as fiduciaries, whether or not they are fiduciaries in the legal sense. Going into the process with this mind-set will result in getting a lot of things right the first time, without having to go back and redo everything after trouble arises. Thus, family members, members of an institutional or family investment committee, investment advisors, and so on should all have a fiduciary mind-set.
One extremely important fiduciary activity is to document every significant policy that guides the management of the portfolio. Some of these policies will be incorporated into an investment policy statement, some may be found in a separate spending policy statement, some may take the form of manager guidelines or guidelines for the management of cash. But it doesn't matter what the issue is—if it's important, write it down!
In this chapter I will discuss the major kinds of written investment policies most substantial investors will need, and will give examples of written policies that I consider to be well crafted.
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