Investment Policy Statements to Keep the DC Plan on Track
Yogi Berra’s wisdom is particularly apt for investment policy statements (IPS): On the one hand, an investment committee that tries to manage its DC plan without an IPS is apt to lose its way. On the other hand, if—like the Yogi Berra quote—an IPS is unclear or confusing, it can also lead to bad outcomes.
In the latest edition of the DC Observer, I describe the best approach for defined contribution (DC) plan sponsors when it comes to crafting and implementing their IPS and the role it plays in investment committee decision making.
I advise sponsors to define the purpose of the IPS up front. It should also outline the roles and responsibilities of the committee; the plan’s investment structure; the sponsor’s approach to evaluating and monitoring managers; the method for handling investments with special circumstances such as company stock; the plan’s policy on fees; and the committee’s process for reviewing and updating the IPS.
To paraphrase Berra, writing an IPS is 90% creating a sound road map for the committee; the other half is keeping it simple.
To learn more, find the full paper here.
Lori Lucas, CFA, is Callan's defined contribution (DC) practice leader.