The Investment Policy Statement: A Family Office Foundation
An IPS sounds like a document. In practice it is the agreement between the family and the office about what the portfolio is for.
Key takeaways
- —The IPS owns return objectives, risk tolerance, and asset-allocation ranges.
- —It also owns liquidity policy, ESG constraints, and concentration limits.
- —Review cadence should be annual; revision triggers should be explicit.
- —The IPS is signed by the investment committee, not just drafted.
An Investment Policy Statement is the contract between the family (through its investment committee) and the investment team about what the portfolio is supposed to do. It specifies return objectives, risk parameters, asset-allocation ranges, liquidity needs, ESG and exclusion preferences, concentration limits, and the protocols by which deviations are escalated. Without an IPS, the team is forced to interpret intent in real time — and the family is forced to second-guess decisions retrospectively.
A working IPS is reviewed annually and revised when the family's circumstances change materially: a major liquidity event, a generational transition, a meaningful change in risk capacity. Between reviews, the IPS is the standing reference. The investment committee minutes should reference it explicitly when material decisions are made — that habit is what gives the document its real authority.
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