Drafting Your Investment Policy Statement: 10 Critical Issues

March 29, 2023 |
1 minute read

Endowed institutions differ in their missions, capabilities and resources, and investment policy statements naturally mirror these differences.  In that sense, there is no single ‘right’ investment policy statement; each institution’s board must craft a statement that responds to the needs of the institution and the preferences and risk tolerances of the trustees. 

Annual review of the statement by the board can help to ensure that it remains an appropriate distillation of the institution’s investment philosophy and practice.  It can be said, however, that a properly drafted investment policy statement should address, at a minimum, the following ten issues:

1. Purpose of the investment pool

What is the purpose of the investment pool? What is its role in supporting the mission of the institution?

2. Duration of the pool

Is the fund intended to be perpetual in duration, or will it have a finite life? To what extent is maintenance of purchasing power an explicit goal?

3. Responsibility for investment decisions

What are the required qualifications of these individuals, and how are they to be recruited?

4. Delegation to a committee, a consultant, or a manager

If the board of trustees intends to delegate its authority to an investment committee or some other body or entity, how should that delegation be evidenced and documented?

5. Target return and endowment dependence

What is the investment pool’s target return, both in nominal and real (i.e., after inflation) terms? What is its expected annual contribution as a proportion of the institution’s operating budget or other relevant criterion?

6. Investment Strategy

What should be the overall investment strategy of the fund, including asset allocation targets and ranges, permitted and prohibited investment strategies and instruments?

7. Risks

What kind and degree of risk is the board prepared to take in pursuit of its investment goals? How are risks to be defined and measured?

8. Liquidity

How much liquidity should be maintained by the fund, either for investment needs within the fund or for wider institutional purposes?

9. Spending

How much of the endowment should be spent and how much reinvested? What rules determine how this amount is calculated?

10. The fund’s role in supporting the balance sheet

To what extent is the fund expected to assist in maintaining the balance sheet of the institution (for example, by supporting its credit rating)?

Click here to download our full whitepaper, The Investment Policy Statement and take a deep dive into the details. 

The Investment Policy Statement 2023
George Suttles


George Suttles

Executive Director

George Suttles


Allison Kaspriske


Stay connected with the Insights Blog

Popular Blog Posts

Market Commentary | Insights Blog

Chart of the Month | The Surprising Relationship Between Money Supply and Inflation

The potential for rising inflation is becoming a top concern for many investors and consumers. Many believe that inflation is already here as evidenced by price increases in commodities, homes,...
Perspectives | Insights Blog

The Case for Using the Higher Education Price Index® (HEPI) to Define Inflation for Colleges

When calculating return targets for an endowment portfolio, a conventional piece of the equation is often the Consumer Price Index (CPI). CPI plus 5% is the common short-hand formula for institutions...
Governance And Policy | Insights Blog

Endowment Management and the Three Primary Responsibilities of a Board

The fourth blog in the “Six Ps of Investment Stewardship” series addresses People, specifically how boards function within an organization. To learn more about the first four principles in the series...


Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.