COMMENTARY: Disentangling Investment Policy and Investment Strategy for Better Governance

Institutional investors have failed to apprehend the difference between investment policy and investment strategy. Most trustees, CIOs, and consultants don’t appear to know where one leaves off and the other begins. Trustees should concern themselves with institutional investment policy, the principal focus of which is controlling risk and ensuring liquidity. In practice, however, trustees have allowed their deliberations to encompass elements of active investment strategy. Consequently, performance accountability has become clouded. This article discusses how trustees can fix the problem.