Creation / Revision of Investment Policy Statement



 The purpose of the investment policy document is to define the investment objectives and establish guidelines and evaluation criteria for insurance company assets. The document specifically outlines the investment philosophy and practices of the company, in order that: there is a clear understanding on the part of the Trustees, Staff, Investment Manager(s) and all outside service providers as to objectives, goals and restrictions with regard to investment of assets; that assets are structured and invested in a prudent manner; and that there is a meaningful basis for the evaluation of asset classes, investment managers and strategies used to achieve investment objectives.

The policy document is critical to the overall direction, understanding and compliance of investment strategy and its implementation. Investment objectives, Portfolio structure, Responsibilities of involved parties, Risk control procedures, Derivative policy, RBC constraints, Permitted investments, State/Federal regulatory factors, Investment manager performance criteria, guidelines and constraints, oversight, communication and benchmarks all must be addressed.

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Effective benchmarking provides sufficient information to determine when corrective action is necessary.

Indexes are valuable components of the benchmarking process, but by themselves are not sufficient. Simple index comparisons lack the context required to draw meaningful conclusions.

Because indexes provide only a single comparative data point for each time period, it takes decades* to determine with any statistical meaning whether or not an investment manager has positive or negative skill. So by the time you have enough data to reach a conclusion, it's far too late.