MAXI CAPITALIST

Library guide · Governance

What Is an Investment Policy Statement (IPS)?

The document that sets the rules for how a family's capital is invested, and why every serious office has one.

Last updated 8 August 2026 · 2 min read

An investment policy statement, or IPS, is the written document that governs how a family's capital is invested. It sets out the objectives, risk tolerance, target asset allocation, liquidity needs and rules for the portfolio, so that decisions follow an agreed long-term plan rather than emotion or the latest market mood.

Behind every well-run pool of family capital sits an unglamorous document that does more to protect wealth than any single investment decision: the investment policy statement. It is the rulebook for the money.

What it is

An investment policy statement (IPS) is the written framework that governs how a family's capital is invested. It records, in advance and in agreement, the answers to the questions that otherwise get decided in the heat of a boom or a crash: what the money is for, how much risk the family will accept, how the portfolio should be allocated, how much liquidity it needs, and who decides what. In effect, it is a constitution for the portfolio.

What it contains

A typical IPS sets out:

  • Objectives and time horizon: what the capital must achieve, and over what period.
  • Risk tolerance: how much volatility and potential loss the family will accept.
  • Target asset allocation, with ranges, across public markets, private markets and other assets.
  • Liquidity needs: how much cash the family may require, and when.
  • Constraints: concentration limits, ethical exclusions, or holdings that must not be touched.
  • Roles and decision rights: who proposes, who approves, what escalates.
  • Rules for rebalancing and review, and the benchmarks against which performance is judged.

Why it matters

The IPS does three things nothing else does as well. It imposes discipline, so the portfolio follows an agreed plan rather than emotion, the single biggest destroyer of returns, when markets panic or euphoria strikes. It aligns everyone, the family, the office and any external managers, on the same goals and limits. And it provides continuity and accountability: a stable framework as people and generations change, and a clear benchmark to judge whether the portfolio is doing its job.

Where it fits

The IPS is the investment counterpart to the family's broader governance. Just as a family constitution sets the rules for how the family makes decisions together, the IPS sets the rules for how its capital is invested. For any family office, drafting one, and actually following it, is among the highest-leverage things it can do. See How Do Family Offices Invest?

Frequently asked questions

What is an investment policy statement (IPS)?
An IPS is the written framework that governs how a family or institution invests. It defines the investment objectives, risk tolerance, target asset allocation, liquidity requirements, and the rules and responsibilities for managing the portfolio. It is the constitution for the money, keeping decisions consistent and disciplined over time.
Why does a family office need an IPS?
Because it turns investing from ad hoc reactions into a disciplined, agreed plan. An IPS aligns the family, the office and any external managers on goals and limits, guards against emotional decisions in booms and crashes, provides a benchmark to judge performance against, and preserves consistency as people and generations change.
What does an investment policy statement include?
Typically the investment objectives and time horizon, risk tolerance, target asset allocation with ranges, liquidity and cash-flow needs, constraints (such as ethical exclusions or concentration limits), the roles and decision rights of those involved, and rules for rebalancing and reviewing performance.

This guide is educational and general in nature. It does not constitute investment, legal, tax or financial advice.