Investment Resources

Investment Resources

What is an IPS and Why do we need one?

Definition of an Investment Policy Statement (IPS) as per Investopedia: “A document [typically] 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.”

Every United Church organization should develop its own policy statement to ensure that it is managing its long term funds efficiently, effectively and with the core values of the organization and denomination. An IPS can be created before determining the investment manager (should your organization choose to engage one) but be opening to modifying the statement on the advice of the chosen manager. The IPS should be regularly reviewed (annually or at least once every three years) to ensure it still meets the needs and reflects the values of the organization.

Some things you will need to consider when drafting an IPS:

  • Liquidity – how often or potentially how urgently will you need to access the funds?
  • Time Horizon – how long will it be until you anticipate or know you will need the funds? (6 months, 2 years, 10 years, or will the capital be invested forever and only income be spent?)
  • What rate of return will you need to accomplish the work your investments are to support?
  • Risk – most congregations are fairly risk adverse and strike a balance of a low-to-medium risk level with their investments. At this level of risk you will have options beyond GICs which pose their own risk of underperforming during certain economic circumstances.
  • Values – how will your investments reflect the values of your congregation?
  • Who will be involved and how will they be involved? Will they oversee a manager or choose the investments?
  • How much control do you want to have – do you want to actually select the holdings in the portfolio (very labour intensive), do you want to buy mutual (aka pooled) funds where you are buying a bundle of securities in one vehicle, or a combination of the two approaches? Do you want to be able to vote as a shareholder? Etc.

An IPS doesn’t need to be very long to adequately convey the needs, requirements and desires of the organization. Sometimes one page is enough to describe how your congregation will manage its investment process.

What an investment policy should contain

  • A general a statement about what the congregation is trying to accomplish with its investments.
  • A statement on diversification
    • The Foundation’s own statement says “The Investment Committee will attempt to achieve reasonable diversification with respect to asset classes, market sectors, term of interest bearing securities, and risk.”
  • Asset allocation describing the minimum and maximum percentages of different categories of investment vehicles (e.g. bonds, equities, etc.).
    • The Foundation’s policy states the following asset mix:
      Category Minimum Maximum
      Cash & money market 0% 20%
      Canadian bonds 20% 60%
      Canadian equities 30% 50%
      US & international equities 10% 30%
  • How performance will be measured – will absolute returns be the basis or what benchmarks will you use? Will the management and other fees be taken into account?
  • If you use a manager how you will evaluate their performance and what would be cause for termination of the relationship.

Resources:

  1. An article from the Globe and Mail about why you should have an IPS and what it should contain.
  2. A guide on what to consider and put into an IPS. There are worksheets and online classes that could be quite helpful if you modify the content to reflect the congregation instead of an individual.
  3. Detailed step-by-step on how to create an IPS. If you follow their instructions closely you will create a more detailed policy than is necessary or particularly useful in most cases for congregations especially if a fund manager or investment advisor will be choosing the stocks/bonds/etc. that will be held in your portfolio.

Sample Policies:

  1. Template Investment Policy (University of Toronto – Faculty of Computer Science)
  2. Template Investment Policy (Council of Community Services of New York State)
  3. Sample Investment Policy (Governing Council of University of Toronto)
  4. United Church of Christ (US) Funds Sample Investment Policy

Resource on managing long term funds:

The Foundation’s fund manager, Fiera Capital has shared their guide on endowment management: Fiera Capital Endowment & Foundation Guide