An investment policy is intended to communicate the goals that a client has in terms of investing alongside any strategies that will guide the process of managing the portfolio. A good investment policy statement (IPS) is important because it provides a crucial tool to keep clients focused on their stated objectives. They will also help maintain the emphasis on the client’s needs and help in avoiding deviations from the strategy because of the changing conditions in the market.
In the ideal scenario, a good IPS includes two crucial and interconnected components, such as the client’s outline of both qualitative and quantitative objectives and a framework for a set of metrics allowing for evaluating the construct of the portfolio, considering risk measures and appropriate returns. Overall, IPS will continue to be relevant because they provide guidance on how a portfolio will be constructed and managed.