Investment Policy Statement (IPS) in Family Offices #
An Investment Policy Statement (IPS) is a foundational document for family offices, providing a strategic guide for the planning, execution, and oversight of investment activities.1 Centered around the family’s mission and values, an IPS sets out the objectives, governance, risk parameters, and reporting frameworks that shape wealth management across generations.2
Core Components of an IPS #
- Governance Framework: Defines accountability, decision-making, and monitoring processes, including roles of the investment committee, advisers, and principals.3
- Objectives and Strategy: Articulates family financial goals, risk appetite, liquidity needs, legacy intentions, and philanthropic pursuits.4
- Asset Allocation and Risk Management: Provides principles for portfolio construction, diversification, and risk tolerance.5
- Manager Selection & Oversight: Sets criteria for hiring internal/external asset managers, benchmarks, and reporting standards.6
- Performance Monitoring: Outlines review cycles, reporting tools, and corrective protocols.7
- Distribution Policies: Specifies how distributions are managed for individual family members or philanthropy.8
An IPS is a living document, reviewed and updated as family needs or market realities change. It is essential for minimizing behavioral investment mistakes during market volatility.1 Industry best practices recommend integrating the IPS into family governance and investment committee meetings.9
Best Practices for Implementation #
- Engage family members in defining objectives and risk
- Align IPS with family values, mission, and broader governance documents
- Use independent benchmarks and regular external audits
- Document and communicate changes transparently
- Employ robust reporting and monitoring software
Leading family offices utilize the IPS not only for investment discipline but also as an educational tool for family members and as a basis for intergenerational planning.4
