An investment policy statement (IPS) for nonprofits such as public charities and private operating foundations is a living document that governs the investment of the organization’s charitable assets to further its philanthropic mission. Essentially, an IPS is a roadmap for investing the nonprofit’s financial assets in stocks, bonds, ETFs, mutual funds, or other financial investments.
The IPS answers questions such as:
- What asset classes and investment vehicles should be considered?
- What are the criteria for selecting or replacing investments?
- What level of risk tolerance is acceptable?
- What is the time horizon for the investments?
- What is the spending policy?
Nonprofit and foundation boards have a fiduciary duty to monitor investments and take action, when necessary, to protect the financial viability of the organization. Having, abiding by, and regularly evaluating the IPS is considered a best practice and is integral to the strategic management of assets.