Investment Policy

This walks you through building a proper Investment Policy Statement, from calculating required returns and assessing risk tolerance to setting rebalancing triggers and manager selection criteria. You get the full LLTU+U constraint framework, the spending rate formula for endowments (spending + inflation + fees), and the rule that when risk ability and willingness conflict, the lower one governs. It covers both individual portfolios and institutional funds with worked examples for each. The benchmark selection criteria and Five Ps for manager evaluation are solid reference material. If you need to document investment strategy or reconcile a client's financial capacity with their actual comfort level, this gives you the structure and formulas to do it right.

skills.sh installs: 801
GitHub stars: 224
last updated: Aug 21, 2026

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Install

$ npx -y skills add joellewis/finance_skills --skill investment-policy --agent claude-code

Installs into .claude/skills of the current project.

Files

Investment Policy Statement Construction

Core Concepts

Investment Policy Statement (IPS)

The IPS is the governing document for all investment decisions. It specifies objectives (return and risk), constraints, asset allocation ranges, rebalancing policy, benchmark selection, and review schedule. Every portfolio action should be traceable back to IPS provisions.

Return Objective

The required return is the rate that funds all future liabilities and goals.

Required return: Solve for the discount rate that equates the present value of assets to the present value of future liabilities/spending needs.
Spending rate (endowments/foundations): Typically set as a percentage of a rolling average of portfolio value (e.g., 5% of 3-year rolling average AUM). The required nominal return must cover spending + inflation + fees.
- Required nominal return = spending rate + expected inflation + investment management fees