WHAT INFORMATION IS CONSIDERED A NECESSARY EVIL IN CONSTRUCTING AN INVESTMENT POLICY STATEMENT? (SHOULD BE RELATED...

WHAT INFORMATION IS CONSIDERED A NECESSARY EVIL IN CONSTRUCTING AN INVESTMENT POLICY STATEMENT?
(SHOULD BE RELATED TO FINANCE/ ACCOUNTING)

KINDLY ANSWER ASAP
VERY URGENT

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Expert Solution

Good investment policy statements:

Provide appropriate guidance on portfolio construction and management
Maintain focus on the client's mandate and assist in avoiding deviations due to changing market conditions
Serve as a critical tool in keeping clients focused on their stated objectives

Bad investment policy statements:

Are written to solely satisfy compliance or regulatory requirements
Are vague and fail to be integrated into the portfolio construction and management process
Provide no means of testing the success or effectiveness of the portfolio design to actual results, nor a way for the client to effectively reconcile the emotional definition of a conservative, self-professed mandate to the quantitative portfolio results

Ugly investment policy statements:

Are crafted in broad terms with the effect that similarly stated objectives can have drastically different interpretations from one client to another
Leave a client comparing portfolio performance to market and asset-class benchmarks that may or may not have relevance to the client's stated objective

ekkarill92 answered 1 year ago

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