Chapter 22, Problem 11CP

Summary Introduction

(a)

To determine:

To define and give examples showing the differences between an investment objective, an investment constraint, and investment policy

Introduction:

An investment policy statement (IPS) is defined as a document which is drafted for a portfolio manager by his client that states the general principles for investment for the manager. This statement gives the broad investment objectives and constraints of a customer and illustrates the strategies to be formulated by the manager for meeting these objectives.

Summary Introduction

(b)

To determine:

To identify and describe an appropriate set of investment objectives and investment constraints for the Jones Foundation

Introduction:

Investment objective can be a combination of desired goals. It may be for maximizing income or preserving income. It is the reason for investing.

Investment limitations or restrictions in investment strategy require equal importance as investment objective.

Summary Introduction

(c)

To determine:

A comprehensive investment policy statement for the Jones Foundation to be recommended for adoption by the trustees

Introduction:

An investment policy statement (IPS) is a document drafted for a portfolio manager by his client that outlines general rules for investment for the manager. This statement gives the broad investment objectives and constraints of a customer and illustrates the strategies to be formulated by the manager for meeting these objectives.