Given the broad scope of an Investment Policy Statement, it is important that the client resolve all key issues impacting their investment program prior to preparing the document. Of particular importance are the client's target asset allocation, rebalancing policy and spending policy. If the client is not satisfied with these aspects of their current investment program, then these issues should be resolved before an IPS is prepared. 

IPEX uses the term Investment Policy Statement to refer to all of the documentation that addresses any substantive, administrative or procedural issues concerning any aspect of an investment program, not simply the document that sets forth the investment strategy. A well thought out and comprehensive IPS will cover a myriad of topics. There are some issues that should be included in any IPS, some that relate to a particular type of investment program and some that are client specific. These issues can be broken down into three main categories. 

The first category presents the specific goals and objectives that the client has established for the account. All of the provisions that define, measure and prioritize risk and return, as well as those provisions that establish appropriate time frames for evaluation would be included in this category, as would the client's spending policy and cash flow needs. 

The second category delineates how the account will be managed. This category includes investment style issues, asset allocation issues, sector and security concentration issues, permitted securities and prohibited transactions, as well as any other topics that the client would like to address, such as socially responsible investing. For most of these issues both targets and variance ranges are established, as are procedures, such as rebalancing, to address significant variances from any of the targets. 

The third category relates to all of the administrative issues that may impact an investment program. These provisions define the responsibilities and authority of the various entities that comprise the program. In addition, these provisions establish communication protocols and consolidate all of the miscellaneous information concerning the operation of the account. Although these provisions have no direct impact on management, per se, they can help to improve operations and to avoid misunderstandings that might cause confusion.