The process of developing an IPS ensures that the client understands the relationship between the organization and the fund, and facilitates the development of an investment strategy that is consistent with the organization's long-term goals. Once completed, the IPS becomes both a working document, that the client can reference as new situations arise, and an historical document, that the client can make available as needed to explain the purpose, strategy and operation of the program.

The process of preparing and ratifying an IPS ensures that the client will have addressed all relevant issues impacting their investment program and reached a consensus on how best to proceed. One of our primary responsibilities as an independent consultant is to work with investment committees in preparing an IPS, in order to help them to reconcile any conflicting viewpoints and to enable them to forge a genuine consensus. 

The entire decision making process is enhanced by the discipline that preparing an IPS requires. The very act of preparing the document often compels a client to examine issues that have been overlooked, and then to establish a policy. Without an IPS, decisions tend to be made on an ad hoc basis, without any reference to an overall investment strategy or long-term implications. An IPS discourages this type of activity. While an IPS never ties the hands of an investment committee, it strongly encourages them to take the time to address an issue logically, particularly if they are going to contravene a well established policy. 

IPEX firmly believes that one of the principal purposes of an IPS is to define the respective responsibilities of the client and the manager and to strike a proper balance. Broad policy issues, such as asset allocation or the inclusion of different types of securities, should be resolved by the client. If these types of decisions are officially delegated to the money managers, or left to them by default, the client may soon discover that their investment portfolio is far different from what they had expected. 

By the same token, authority for all day to day operational decisions, such as the selection, purchase or sale of individual securities, should be delegated to the managers. The failure to delegate this authority, and to maintain a hands off policy, can make it difficult to obtain a true measure of the manager's investment style and investment performance.