Developing an investment policy

An investment policy statement is a plan-specific document designed to address the objectives, constraints, unique circumstances, and overall policies that govern investment related activities of a plan.  All investment policies should contain a section detailing any circumstances unique to your multi-employer plan.  Such circumstances might include avoiding investing in companies that utilize, unfair labor practices, for example.  The policy should set forth clear responsibilities for all parties involved in the investment program – the board of trustees, investment advisor/consultant, investment managers and custodians.  A well written policy will present the plan’s financial objectives within the context of how much risk the trustees are willing to take on.  The long-term strategic asset allocation of the portfolio should be detailed, to ensure that the portfolio is invested in accordance with the plan’s long-term goals.  While change to the policy should normally be infrequent, the document should be reviewed on a regular basis to ensure that it is current and that all of the language is appropriate and that the plan is in compliance.  The policy plays an important role in the overall governance structure of the fund.