Developing a business plan
Developing an Investment Policy Statement
If there's money coming into your trust, you should define how it will be used, shared or invested.
What matters to Māori investors
As Māori we have, since the dawn of time, acknowledged our role as the kaitiaki of the whenua, as well as the importance of the whenua to sustain whānau intergenerationally. Economic wealth for us is often about enabling a wider, positive social objective within our whānau and communities.
Research by Fi360 Pacific into what drives Māori investors showed there are more than 50 things we consider when making these critical decisions for now and future generations. These were grouped and summarised as:
- We need a full and comprehensive suite of customer services.
- We want you to help us make great decisions.
- We need support to create and preserve our wealth.
- We must at all times achieve a balance.
- Whoever we work with must be trustworthy.
Other responses included more technical aspects of investing, like:
- identifying balanced options
- being clear on the purpose of investing
- being compliant with law and best practice
- financial systems support, and
- looking at opportunities to leverage our endowments and the options we have.
What is an Investment Policy Statement (IPS)?
An Investment Policy Statement (IPS) documents how trustees should invest trust funds in the best interest of members or owners, providing guidance for decision-making related to investing.
It should tie into the trust's business plan, with investment objectives being reflected in both overarching financial and non-financial KPIs.
What it should include
Investment fiduciary specialists Fi360 Pacific say a sound investment policy should have:
- enough detail for any competent third party to implement the investment strategy
- enough flexibility that it can be implemented in a complex and dynamic environment, and
- not so much detail that it requires constant revisions and updates.
It should cover:
- trustees’ legal obligations, and what they can and can’t do with the trust’s assets
- a statement of objectives — what the trust wants to achieve from investing
- the roles and responsibilities of all parties involved in managing the trust
- how the trust’s funds will be prudently invested (allocated), and the risk associated with this — with regards to endowments, values and social objectives
- how the trust will complete due diligence on investments or providers (like consultants)
- how any conflicts of interest will be managed
- a monitoring and reporting plan.
Who should have one
It's best practice for all trusts to have one, especially if there are financial objectives in the business plan, like:
- reinvesting capital in the whenua
- paying a dividend to owners or beneficiaries
- diversifying the trust’s portfolio.