An Investment Policy Statement (IPS) is a document that is drafted between a portfolio
manager and his/her client. The statement outlines a client's general goals and
objectives and describes strategies that should be employed to meet those objectives.
This document contains language commonly used is this type of statement; however,
additional language may be added by the portfolio manager and the client so that the
client’s needs are addressed. Use the document if one is a portfolio manager, and one
wants to produce a statement with his or her client to outline the client's general goals,
and objectives, and the necessary strategies that must be employed in order for the
client to achieve those goals.
Investment Policy Statement
This investment policy statement covers all the operating funds of [COMPANY
NAME], hereinafter referred to as the “Corporation.”
The Chief Finance Officer, or other officer appointed by the Board, shall manage the
investment portfolio and shall invest with the judgment and care that a prudent individual
would exercise in the execution of his/her own affairs, to maintain the safety of his/her
principal, ensure liquidity to enable to meet cash flow needs, and provide reasonable
investment returns to the Corporation.
From time to time, the investments may be managed by professionals through external
programs and facilities. Adherence to this policy shall be maintained at all times.
2. Investment Objectives
The primary objectives of investment activities, in priority order, are safety of principal,
liquidity, and returns.
2.1 Safety of principal
The Corporation will minimize credit risk by: (1) pre-qualifying financial institutions,
advisers, intermediaries and dealers/brokers with which the Corporation will do business,
and (2) diversifying the portfolio to minimize potential losses on individual securities.
The Corporation will minimize interest rate risk by: (1) structuring the portfolio in such a
way that maturing securities will meet cash needs, and (2) primarily investing the
operating funds in short-term securities.
Liquidity requirement shall be met by structuring the investment portfolio such that
securities mature in consonance with cash needs. Furthermore, to meet unanticipated cash
requirements, the portfolio shall consist largely of securities with active secondary or
resale markets. Negotiable securities may be sold prior to maturity to provide liquid funds
as needed for cash purposes only.
The investment portfolio shall be structured with the objective of attaining a competitive
rate of return provided that the constraints of safety of principal and liquidity
requirements are met. Securities shall not be sold prior to their maturity period except in
the following cases: (1) a security with declining credit, and (2) liquidity requirements
that require that securities be sold.
3. Standards of Care
3.1 Prudence — Investment Policy
Investment officers shall use the standard of care of a “prudent person,” which shall be
applied to the overall portfolio. Investment officers, acting in accordance with written
procedures and this investment policy and exercising due diligence, shall be relieved of
personal liability for an individual security’s credit risk or price changes, provided that
deviations from expectations are reported in a manner consistent with this policy and the
liquidity and the sale of securities are carried out in adherence to this policy.
3.2 Ethics and Conflict of Interests — Investment Policy
Officers and employees involved in managing the Corporation’s investment portfolio
shall refrain from doing personal business activities that may conflict with the proper
exercise and management of the investment program or that could impair their abilities to
perform impartial decisions in relation to the management of the Corporation’s
investment portfolio. They shall also disclose any material interests in financial
institutions with which they conduct business. Furthermore, they should disclose any
personal investment/financial positions that could be related to the performance of the
Corporation’s investment portfolio. They should also refrain from engaging in personal
investment transactions with the same individuals or companies with which business is
conducted on behalf of the Corporation.
3.3 Delegation of Authority — Investment Policy
Authority and responsibility for the operation of the investment program is hereby
delegated to the Corporation, which shall act according to the established written
procedures and internal controls consistent with this investment policy. The Corporation
shall be responsible for all transactions undertaken with regard to the investment program
and shall establish a system of controls to regulate the activities of subordinate officers.
3.4 Audits — Investment Policy
The books and