GIGAMIND

Folder:
115 CFA
File:
115.100.04.01 Portfolio Management - Reading 54 - 1. The Investment Policy Statement and its Major Components

1. The Investment Policy Statement and its Major Components

a. describe the reasons for a written investment policy statement (IPS);

b. describe the major components of an IPS;

What is an investment policy statement?
The IPS covers the types of risks the investor is willing to assume along with the investment goals and constraints. It is considered the first step of portfolio management.

Why is an Investment Policy Statement important?
A policy statement should incorporate an investor's objectives (risk and return) and constraints. Performance cannot be judged without an objective standard.

What are the eight components of an Investment Policy Statement?
1. introduction
2. statement of purpose
3. duties and responsibilities
4. procedures
5. investment objectives
6. constraints and guidelines
7. evaluation and review
8. appendices


Source:
  • CFA