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The Investment Policy Statement

The form of an investment policy statement (IPS) is to some extent a matter of individual preference. Some families prefer extensive, highly detailed policy statements covering every possible contingency, whereas others prefers brief, one- or two-page documents touching on only the most important points.

My personal feeling is that for a family, more is better, especially when the “more” focuses on the family itself: its antecedents, its culture, its hopes, its worries. A family IPS should be written with the thought that it will be read by a family member a generation or two down the road. It should therefore be interesting, easy to understand, nontechnical in its language, and should make the reader proud to be a member of a family that was concerned enough about the future to pen such a document.

Once a family has gone to all the trouble to design a sound investment portfolio and to think through how that portfolio will be managed and governed, the next important step is to write it all down. An investment policy statement is the written record of the work you have done, and it will serve as a guide to the management of the family's capital over the years. Though such policies can always be revisited and modified in light of experience, the development of and adherence to written policies will have several powerfully positive affects.

First, for fiduciary portfolios in the legal sense, in the rare but certain event of extremely adverse investment ...