Creating a nonprofit investment policy statement (IPS) is a critical step for any organization looking to manage its investments effectively. An IPS outlines the organization’s investment objectives, risk tolerance, and investment strategies. It provides a roadmap for making investment decisions and ensures that those decisions are aligned with the organization’s mission and goals.
There are many different nonprofit investment policy statement templates available online. However, it is important to choose a template that is specific to your organization’s needs. Consider your organization’s size, investment experience, and risk tolerance when selecting a template.
Components of a Nonprofit Investment Policy Statement
A nonprofit investment policy statement typically includes the following components:
- Investment Objectives: This section outlines the organization’s investment goals. These goals may include preserving capital, generating income, or growing the endowment.
- Risk Tolerance: This section describes the organization’s tolerance for risk. Some organizations may be more willing to take on risk in order to achieve their investment goals, while others may be more conservative.
- Investment Strategies: This section outlines the organization’s investment strategies. These strategies may include investing in stocks, bonds, or real estate. Asset allocation is also a key component of this section.
- Investment Performance Monitoring: This section describes how the organization will monitor the performance of its investments. This may include setting benchmarks and conducting regular reviews.
- Review and Revision: This section describes how the organization will review and revise its investment policy statement. This may include making changes to the investment objectives, risk tolerance, or investment strategies.
Benefits of a Nonprofit Investment Policy Statement
There are many benefits to having a nonprofit investment policy statement. These benefits include:
- Clarity and Consistency: An IPS provides clarity and consistency to the investment process. It ensures that all investment decisions are made in accordance with the organization’s mission and goals.
- Reduced Risk: An IPS can help to reduce risk by outlining the organization’s risk tolerance. This helps to ensure that the organization does not take on too much risk in its investments.
- Improved Performance: An IPS can help to improve investment performance by providing a roadmap for making investment decisions. This helps to ensure that the organization is investing in the right assets to achieve its investment goals.
- Increased Accountability: An IPS can help to increase accountability by providing a clear record of the organization’s investment decisions. This helps to ensure that the organization is making investment decisions in the best interests of its stakeholders.
Conclusion
A nonprofit investment policy statement (IPS) is a vital tool for any organization looking to manage its investments effectively. An IPS provides clarity and consistency to the investment process, reduces risk, improves performance, and increases accountability. By following the steps outlined in this article, you can create an IPS that will help your organization achieve its investment goals.
There are many different nonprofit investment policy statement templates available online. However, it is important to choose a template that is specific to your organization’s needs. Consider your organization’s size, investment experience, and risk tolerance when selecting a template. Once you have selected a template, you can customize it to meet your specific needs.
