Making a statement

Almost every trust holds investments and, as such, almost every trustee needs to carefully consider how such investments should be managed. Many trusts will engage an investment manager to ensure that investments are professionally managed; it is prudent for all trustees to ensure there is a statement that provides guidelines and objectives for trustees and their investment managers for governing investments held within a trust.

STEP has developed an updated sample investment policy statement (IPS) and accompanying guidance, drawing together previous templates provided by STEP, best-practice principles and discussion points.

The IPS aims to assist trust practitioners in complying with trustee requirements and has been drafted with the trustees of private family trusts in mind, although trustees of charities should also consider the requirements for an IPS. It is good practice to have a written statement in place from the outset of any delegation of investment powers to professional qualified advisors. The IPS also provides investment managers with guidance on the parameters of their engagement and the governance surrounding the investments held by the trust and/or its underlying entities.

Although there is no prescribed format in legislation around the world, the template statement has been developed to include the common issues experienced by practitioners. It should be noted that the statement is a template (a baseline if you will) and, as such, users will need to make updates and amends depending on their circumstances and requirements. The template statement can also be used as inspiration for one’s own IPS.

Amendments and updates

A well-drafted IPS creates clarity for the trustee and investment manager when considering governance, objectives and investment parameters. An IPS should be amended as necessary depending on each specific trust’s requirement. It should be updated on a relatively frequent basis (perhaps every year or two) to ensure it remains relevant to the needs of the trustee and the beneficiaries and accurately reflects the changing investment environment.

If the IPS remains unchanged over the years it would be prudent for that to be noted accordingly, so that trustee files and minutes record that the matter has been considered. This provides a record for trustees when reviewing trust assets and decisions in the long term and could provide a useful record should investment decisions or actions be questioned by a beneficiary in the future.