Let’s start with the basics: What do we actually mean by investment beliefs?

At their core, investment beliefs answer a deceptively simple question: What does an institutional investor believe to be true about investing? Not in theory. In practice—when markets move, when pressure builds, and when people disagree.

They capture an organization’s assumptions about capital markets, risk, and—most importantly—its own ability to implement an investment program successfully. Whether written down or not, these beliefs quietly shape every major investment decision an institution makes.

Investment Beliefs: Foundation of Governance Framework

These beliefs provide the foundation and direction within an institution’s broader investment governance framework. They inform everything from the investment policy statement (IPS) and asset allocation to manager selection and rebalancing discipline.

Importantly, investment beliefs focus on why an institution invests the way it does and to what purpose—not on the detailed mechanics of how investing is executed. That distinction matters, because institutions often ask how investment beliefs differ from an investment policy statement.

The simplest way to think about it is this:

• Investment belief statements are principle-based and behavioral
• Investment policy statements are procedural and operational

If the IPS is the instruction manual, investment beliefs are the worldview of the person reading them.

And for many organizations, these beliefs already exist—even if they are not explicitly documented. They are often embedded across policies, practices, and behaviors rather than articulated in a single, coherent statement.

Why Formalize Investment Beliefs?

So why go through the effort of documenting investment beliefs?

Based on years of working with institutional investors, we consistently see three core benefits.

1. Alignment and continuity
Investment beliefs get everyone on the same page about why the portfolio was built the way it was. For institutions with volunteer boards or rotating investment committees, this is particularly important. People come and go, but clearly articulated beliefs provide continuity over time.

2. Clear communication
Investment beliefs function as a powerful tool to establish a shared understanding among investment professionals, staff, external managers, fiduciaries, and other stakeholders.

3. Protection against decision drift
Perhaps most importantly—and often overlooked—investment beliefs help maintain consistency in decisions.

• When markets are strong, beliefs help organizations avoid chasing fads.
• When markets are stressed, beliefs provide grounding and guardrails.

Who Is Using Investment Beliefs—and How?

Investment belief statements are now used across all types of institutional asset owners.

Statements of investment belief are meant to be evergreen, though they should be reviewed and refined periodically. And while the specific content varies, most belief statements address key trade-offs that sit at the heart of investment decision-making, including:

• Active versus passive management
  • How it is used in belief statements: We use active management relative to asset class efficiency. We believe that passive management helps with liquidity, rebalancing, and cost control.
• Public-only portfolios versus inclusion of private markets
• Views on tactical asset allocation
  • How it is used in belief statements: Strategic asset allocation is the most important decision; we do not engage in tactical market timing. We believe that compensated risk factors work, and we do not bet against them. Market timing has a low probability of success and a high impact when wrong.
• Internal management versus external delegation
• Tolerance for complexity versus a preference for simplicity in execution
  • How it is used in belief statements: We are skeptical of untested strategies or investment fads. We believe that simple explanations and implementations tend to be more durable.

Although the process for developing investment beliefs is broadly consistent, the beliefs themselves differ meaningfully by institution type.

Corporate Defined Benefit (DB) Plans
For corporate DB plans, success is typically defined by funded status and financial objectives rather than peer comparisons. Risk awareness focuses on contribution volatility and balance sheet impact. Belief systems in this segment tend to emphasize strategic alignment and skepticism toward complexity that exceeds governance capacity.

Public DB Plans
Large public pension plans are shaped by scale, permanence of capital, and public accountability. Common belief themes include the importance of diversification, compensation for bearing equity and illiquidity risk, and selective use of active management where evidence supports it.

Defined Contribution (DC) Plans
Investment beliefs play a particularly important role for investment committees overseeing participant-directed plans. While the same fundamental investment principles apply, DC plan sponsors must also account for participant behavior. Behavioral biases—such as inertia, choice overload, and sensitivity to framing—are critical to how effective investment structures are designed.

Nonprofits
Nonprofit endowments and foundations are typically mission driven and less liability focused. Their investment beliefs often incorporate mission alignment, openness to illiquidity within spending constraints, and greater acceptance of impact or values-based investing. In this context, belief statements also serve as an important communication tool for donors and other stakeholders.

Client Case Study: Local Community Foundation

A community foundation engaged our team during a period of significant transition. Both the board and investment committee—entirely volunteer-led—were welcoming new members, many with deep finance and investment experience. While the committee brought substantial expertise to the table, it was operating without a shared framework. Competing investment philosophies, unclear objectives, and differing views on risk made decision-making increasingly difficult.

Our work began with listening. We observed committee meetings, conducted one-on-one interviews with every committee member and key staff, and spoke with senior stakeholders whose work was directly affected by investment decisions. That process revealed the core challenge: not a gap in skill or sophistication, but a lack of alignment.

Over the course of roughly three months, we partnered with the committee to clarify and refine its financial objectives, identify areas of consensus and tension, and draft an Investment Beliefs Statement that reflected its collective views. Importantly, the draft was not created in isolation—it was stress-tested through a comprehensive strategic review of the portfolio, serving as its first real-world application, before being refined and formally adopted.

The outcome was stronger governance—and something equally important: a shared language. The foundation already had sound governance structures in place. What the Investment Beliefs Statement provided was the “why” behind those structures: a clear, well-articulated rationale for how the investment strategy was designed, one that any board member, staff member, or stakeholder could understand, reference, and rely on.