IPS for Select clients: from trustee objectives to portfolio implementation

Insights

How the IPS bridges the objectives evaluation and manager selection stages of the Select journey, turning the trustee’s objectives into structured fund-level recommendations

4 mins

Topics

Select Specialist Select Connect

Author

Tom Wiseman

CEO

Tom is the Chief Executive Officer of Enhance Group overseeing our multi-jurisdictional Monitor and Select solutions from our Jersey headquarters.

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The Investment Policy Statement is the bridge between the objectives evaluation and manager selection stages of the Select journey. It is the document the Investment Consultant uses to translate the trustee’s objectives, risk tolerance and fiduciary responsibilities into a structured set of parameters the IC-approved fund universe can be matched against. This article is the Select-specific companion to Enhance’s general Insights article on the IPS.

Why a Select-specific IPS?

IPS: a practical guide covers what an IPS is, why it matters, and what it should contain across three pillars: Return & Risk, Holdings, and Tax. That framework is the right approach for trustees of any service, Monitor, Select, or no Enhance engagement at all. This article does not duplicate it. Instead it walks through how the same framework is built, used and refreshed in the specific context of a Select engagement, where the IPS is more than a static document. It is the operating instruction the Investment Consultant follows when constructing the trustee’s portfolio. It is the test against which every quarterly Monitor review checks the portfolio. And it is the document refreshed in regular review meetings as circumstances or market conditions change.

Building the IPS is the structured exercise of formalising the trustee’s objectives, risk tolerance and fiduciary responsibilities into a written policy document, using the raw material from the objectives evaluation working sessions. The Investment Consultant typically works through three drafts. The first captures the substantive content in IPS form. The second, after trustee review, refines specific parameters: drawdown limits, asset allocation bands, holdings constraints, rebalancing rules. The third, ready for signature, captures the agreed final version. Each parameter has a documented rationale alongside it, so future trustees, beneficiaries or regulators see not just what was decided but why.

The IPS is at its most useful when it operates as a structured filter on the IC-approved fund universe. Each parameter, each asset class band, each holdings constraint, each risk parameter, each ethical screen, corresponds to a concrete filter the Investment Consultant applies when selecting funds. The IPS does not sit alongside the portfolio as a separate compliance check; it generates the portfolio. Every fund in the recommendation can be traced back to the IPS parameters that justify its inclusion. If the trustee revisits the IPS and changes a parameter, the implications for the portfolio flow through automatically.

Once the portfolio is implemented and the engagement enters its ongoing rhythm, the IPS is tested in two ways at every review meeting. First, the portfolio is checked for IPS compliance: are asset allocations within the specified bands, are risk parameters being respected. This is formalised through the quarterly Monitor reviews delivered via Connect. Second, the IPS itself is tested for ongoing fitness for purpose, as trustee circumstances, market conditions or regulatory frameworks change. Where a refresh is needed, the same five-stage Select cycle starts again: objectives are revisited, the IPS is revised, manager selection is updated, and changes are implemented subject to trustee approval.

The same template, applied to a Select context

The general IPS framework remains the right starting point for Select clients. What changes in the Select context is not the template but the depth and operational integration of the work behind it. The objectives evaluation in stage 01 of the Select journey is more thorough than what trustees typically conduct alone. The IPS drafting in stage 02 benefits from the Investment Consultant’s direct experience of how parameters translate into platform-implemented portfolios. And the review cycle in stage 05 means the IPS is regularly tested and refreshed, rather than rediscovered when something goes wrong. Trustees who have already read the general guide have covered the substantive ground on what a good IPS contains. This article is about how that same content operates once it is put to work inside a live Select engagement.

Three IPS provisions that matter particularly in a Select engagement

The original IPS article covers the framework comprehensively; three provisions take on particular significance in the Select context. A risk profile, rather than fixed allocation targets, is optimal. Fixed-target asset allocations leave the Investment Consultant unable to respond to market conditions, and cannot in any case constrain the allocation of multi-asset or multi-geography funds that form the basis of the Select approved list. Drawdown limits should remain the primary risk constraint, specified with the time horizon over which they apply, for example a limit of minus ten per cent over any rolling twelve-month period for a cautious mandate. The Investment Consultant uses this parameter as a key filter when selecting funds. And holdings constraints should be expressed at the fund level rather than the security level, since Select implements through funds, not segregated mandates. ESG screens, jurisdictional constraints and currency requirements all need to be expressed in terms the Investment Consultant can apply to fund selection.

The bottom line

The IPS is the bridge between the trustee’s objectives and the implemented portfolio that fulfils them. In a Select engagement it is more than a static signed document. It is the operating instruction the Investment Consultant follows when constructing the portfolio, the test against which every quarterly Monitor review checks the portfolio, and the document refreshed in regular review meetings as conditions change. The framework is the same one set out in the general guide. The difference in Select is that the IPS is operationalised into a live document that drives every recommendation, every review and every refresh in the continuous five-stage cycle.

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