Brighton Perspective

Housekeeping

I have added a link on the left hand side below my picture for my monthly newsletter- Brighton Bulletin. I write on 3 to 4 topics each month, trying to stay brief, which I believe are of interest to readers. I welcome new subscribers as well as suggestions on relevant topics. Feel free to subscribe!

Investment Policy Statements

This article discusses Investment Policy Statements and makes several excellent points. IPS are commonplace among defined benefit plans and endowment/foundations in the institutional world. They are the foundation upon which the Trustees, as fiduciaries, build, manage and monitor their portfolios. The IPS states the return objectives, risk tolerance, time horizon, liquidity needs, investment parameters and benchmarks and any special items that must be considered. From this document, every party involved in managing the portfolio can derive their responsibilities. It matters.

Yet, it is almost non-existent for individual investors and for defined contribution plans. I've noted before it is at the top of the list of DOL requests when the DOL audits a DC plan. So, it should be top of mind for the fiduciaries involved in managing the DC plan - management, consultant, managers, etc. It is just as relevant to individual investors, who I believe, should view their portfolios as endowments. The IPS lays out the same critical guidelines as for institutional plans and provides the reference material for all participants. If you have not created an IPS yet, do so. If you have, review it and make sure its up to date. If your advisor hasn't suggested creating one or has dismissed suggestions to do so, consider a new advisor. Many are loath to admit, but once we assume responsibility for managing client assets, my believe is we assume fiduciary duty to perform in the best interests of our clients (individual or plan participants in a DC plan). The IPS should be step 1.