9/24/2026 1:58 AM (PST)

What is an investment policy statement? It is a formal document that describes how an investor or organization intends to manage its investment portfolio. An investment policy statement typically identifies the investor's objectives, time horizon, liquidity requirements, risk parameters, and permitted investment categories. It may also describe asset allocation guidelines, portfolio monitoring procedures, performance evaluation methods, and responsibilities for investment decisions. For investors using alternative assets, the document can establish guidelines for evaluating opportunities such as private equity, private credit, real estate, hedge funds, or life settlements. For example, an investor interested in life settlements could use an investment policy statement to define criteria for policy selection, acceptable investment size, diversification requirements, expected holding periods, and the amount of capital that can be allocated to the strategy. Understanding what is an investment policy statement is important because it shows that portfolio management is not simply about selecting individual investments. It is about creating a structured framework that connects investment choices with the investor's objectives and constraints.