Ten Mistakes in Investment Policy Development

May 09, 2024

Since GEM’s inception, we have probably seen over five hundred Investment Policy Statements. Though they’ve varied in length, style, and level of detail, we’ve observed that there is a consistent and recurring set of issues related to Purpose, Governance, Construction, Evaluation, and Alignment.

With this framework, we further explore the ten mistakes we most often see in investment policy development:

  1. An undefined purpose
  2. Vague investment goals
  3. Unclear roles and responsibilities
  4. Under- or over-diversification
  5. Assuming historical correlations will hold
  6. Mistaking legal structures for investment strategies
  7. Confusing beta and alpha
  8. Lacking specific benchmarks and time periods
  9. Too much backseat driving
  10. No linkage between the institution, the spending policy, and the IPS

Read our whitepaper to learn more about the importance of carefully crafting an Investment Policy Statement to ensure successful execution of your investment program into perpetuity.

 

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