Investment Policy Statement - IPS


DEFINITION of 'Investment Policy Statement - IPS'

A document drafted between a portfolio manager and a client that outlines general rules for the manager.

This statement provides the general investment goals and objectives of a client and describes the strategies that the manager should employ to meet these objectives. Specific information on matters such as asset allocation, risk tolerance, and liquidity requirements would also be included in an IPS.

BREAKING DOWN 'Investment Policy Statement - IPS'

For example, an individual may have an IPS stating that by the time he or she is 60 years old his or her job will become optional, and his or her investments will annually return $65,000 in today's dollars given a certain rate of inflation. This would be only one of many points included in an IPS; however, it probably would also include such things as general guidelines outlining what the individual wants to leave behind to loved ones when he or she dies.

  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Strategic Asset Allocation

    A portfolio strategy that involves setting target allocations ...
  3. Risk Tolerance

    The degree of variability in investment returns that an individual ...
  4. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  5. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
  6. Tactical Asset Allocation - TAA

    An active management portfolio strategy that rebalances the percentage ...
Related Articles
  1. Personal Finance

    Understand Your Role In The Investing Process

    Knowing what to expect when managing your assets will help you achieve your financial goals.
  2. Options & Futures

    6 Asset Allocation Strategies That Work

    Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right.
  3. Investing Basics

    Portfolio Management Pays Off In A Tough Market

    A clear rebalancing strategy is a critical component of portfolio management, particularly in tough economic times.
  4. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  5. Bonds & Fixed Income

    Interpreting Your Broker's Reports

    Broker's reports can be confusing, but they don't have to be. Find out what information you need from your broker.
  6. Personal Finance

    3 Alternative Ways To Assess Your Investment Manager

    Find out whether your funds are being managed according to your goals.
  7. Mutual Funds & ETFs

    Mutual Fund Tune-Up Delivers High-Powered Performance

    Rebalancing your portfolio will protect you from risk and ensure that your investments are performing at their best.
  8. Markets

    Hedging With Puts And Calls

    This trading strategy can reduce your risk - but only if you use it effectively.
  9. Retirement

    The Gatekeepers: Consultants Hold The Key

    Institutional investment consultants help match up asset managers with large institutions.
  10. Retirement

    Profit With Investment Policy Statements

    Defining how investments are managed and monitored can help investors meet their goals.
  1. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  2. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  3. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  4. What fees do financial advisors charge?

    Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a ... Read Full Answer >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!