Setting Investment Guidelines & Objectives
Setting investment policies requires striking a balance between the desire to maximize investment returns and the need to mitigate risk while maintaining liquidity to meet funding needs.
Segal Advisors develops comprehensive investment policies that clearly identify the plan's and each investment manager's specific goals and objectives and, therefore, provide a benchmark against which ongoing performance will be measured.
Since there are no absolute "right answers" to building a successful investment program, we work together with the client to explain the tradeoffs associated with each investment decision. For example, investment policy discussion issues can include passive vs. active management, appropriate asset allocation strategies, style analysis within asset categories, target asset mix and rebalancing methodologies.
In reviewing investment programs, we study the fund's cash flow and expense characteristics with the goal of establishing overall investment policy guidelines and performance objectives. The study includes:
- A review of experience reports to understand the fund's annual cash flow requirements
- Developing and/or reviewing projections of annual contributions vs. spending and expense disbursements
- Reviewing the current investment program and highlighting any strengths or weaknesses
- Preparing discussions and analyses that:
- Describe the risk and return characteristics of various categories of investments based on our proprietary assumptions and representative market indices
- Discuss the fund's ability to bear the risk associated with portfolios comprising various combinations of asset categories
- Address the advantages and disadvantages of alternative ways to divide responsibilities among investment managers in order to effectively control asset allocation, encourage efficient trading and minimize costs
- Provide comment on the advantages and disadvantages of alternative asset classes and specialty managers