INVESTMENT POLICY STATEMENT [ORGANIZATION NAME] A [STATE] Nonprofit Corporation Adopted by the Board on [Month Day, Year] =============================================================================== HOW TO USE THIS TEMPLATE - Fill in every [BRACKETED] placeholder with your organization's details. - This is a general, adaptable investment policy statement (IPS). The right objectives, risk tolerance, and asset allocation depend entirely on YOUR funds, your time horizon, and your board's judgment — there are no one-size-fits-all numbers. The percentages shown are illustrative examples, not recommendations. - Have a qualified investment advisor and an attorney in your state review this before you adopt it, and adopt it by a recorded board vote. - In most states the management and spending of your invested funds is governed by UPMIFA (the Uniform Prudent Management of Institutional Funds Act). This policy is written to help your board meet that prudence standard; see the UPMIFA note in Section 9. - This is a general template, not investment or legal advice (see the footer). =============================================================================== SECTION 1 — PURPOSE AND SCOPE The purpose of this Investment Policy Statement (the "Policy") is to set the rules under which [ORGANIZATION NAME] (the "Organization") invests its funds, so that those funds are managed prudently, consistently, and in the Organization's best interest rather than on the judgment of any one person. This Policy governs the following funds: [ ] Operating reserve fund (approx. $[AMOUNT] / [#] months of expenses) [ ] Building / capital fund (approx. $[AMOUNT]) [ ] Board-designated reserve (approx. $[AMOUNT]) [ ] Donor-restricted endowment (approx. $[AMOUNT]) [ ] Other: [DESCRIBE] The Organization recognizes that each fund may have a different purpose, time horizon, and risk tolerance, and may therefore be invested differently under this Policy. Day-to-day operating cash held for near-term bills is NOT covered by this Policy and is managed for safety and liquidity in [BANK / ACCOUNT TYPE]. SECTION 2 — INVESTMENT OBJECTIVES The Organization invests the funds above for the following objectives, weighted according to each fund's purpose: 1. PRESERVATION OF CAPITAL — protect the dollar value of the fund and keep it available when needed. [Primary objective for: the operating reserve.] 2. INCOME — generate a reasonable, spendable yield to help support operations or programs. [Primary objective for: [FUND].] 3. GROWTH — grow the fund's value over time so it at least keeps pace with inflation and preserves its purchasing power. [Primary objective for: a long-term or endowment fund.] For each fund, the primary objective is: - Operating reserve: [Preservation / Liquidity] - [FUND NAME]: [Income / Balanced] - Endowment (if any): [Growth, with inflation protection] SECTION 3 — RISK TOLERANCE AND TIME HORIZON The Organization accepts only the level of investment risk appropriate to each fund's time horizon and purpose. - Operating reserve — Time horizon: short (funds may be needed within [#] months). Risk tolerance: LOW. The Organization will not accept material risk of loss in funds it may need on short notice. - [FUND NAME] — Time horizon: [medium / 3–7 years]. Risk tolerance: [MODERATE]. - Endowment / long-term fund — Time horizon: long (intended to last [indefinitely / 10+ years]). Risk tolerance: [MODERATE TO HIGHER], because a long horizon allows the fund to ride out short-term market declines in pursuit of long-term growth. The Board understands that higher expected returns come with greater short-term volatility, and it has set the risk tolerance above with that trade-off in mind. SECTION 4 — ASSET ALLOCATION (TARGETS AND RANGES) The Organization will hold a diversified mix of asset classes for each invested fund. The targets and ranges below are EXAMPLES — set your own based on each fund's objective and your advisor's guidance. EXAMPLE — Long-term / endowment fund: Asset class Target Allowed range -------------------------------------------------- Equities (stocks) [60%] [50%–70%] Fixed income (bonds) [35%] [25%–45%] Cash / equivalents [5%] [0%–15%] EXAMPLE — Operating reserve: Asset class Target Allowed range -------------------------------------------------- Cash / money market [70%] [50%–100%] Short-term bonds [30%] [0%–50%] Equities [0%] [0%–10%] REBALANCING: When any asset class moves outside its allowed range, the [Investment Committee] will rebalance the portfolio back toward target within [a reasonable period / e.g., 90 days]. The portfolio is reviewed for rebalancing at least [quarterly / semi-annually]. DIVERSIFICATION: Investments will be diversified across and within asset classes to reduce the risk of large losses from any single holding, unless the Board determines that, because of special circumstances, the purposes of the fund are better served without diversification. SECTION 5 — SPENDING / WITHDRAWAL POLICY (FOR ENDOWMENT AND LONG-TERM FUNDS) To preserve a long-term or endowment fund for the future while still supporting the mission today, the Organization limits how much of the fund it spends each year. Annual spending rate: [4.5%] of the fund's average market value over the prior [12] calendar quarters (a [3]-year trailing average). Using a multi-year average smooths the annual draw so it does not swing sharply with the market. The Board reviews the spending rate at least annually and may adjust it if prudent. The Organization will not spend from a donor-restricted endowment in a way that violates the gift's terms or applicable state law (see the UPMIFA note in Section 9). In a year of significant market decline, the Board may reduce the draw to protect the fund's principal. SECTION 6 — ROLES AND AUTHORITY No single individual may direct the Organization's investments alone. Authority is divided as follows: 1. THE BOARD OF [DIRECTORS / TRUSTEES] - Adopts and amends this Policy. - Sets the investment objectives, risk tolerance, asset allocation, and spending rate. - Holds ultimate fiduciary responsibility for the funds and oversees those to whom it delegates tasks. - The Board may delegate investment tasks but not its responsibility. 2. THE [FINANCE / INVESTMENT] COMMITTEE - Implements this Policy: selecting and monitoring investments and any outside advisor within the bounds this Policy sets. - Reviews performance against the benchmarks in Section 8 and reports to the Board at least [quarterly]. - Recommends changes to this Policy to the Board. - Members: [#] persons, including [the Treasurer and at least one other board member]. 3. OUTSIDE INVESTMENT ADVISOR (if engaged): [NAME / FIRM, or "to be selected"] - Manages or advises on the portfolio within this Policy. - Must acknowledge this Policy in writing and report to the [Committee]. - Should be a [registered investment advisor / institutional fund manager] acting as a fiduciary to the Organization. SPENDING AND TRADING AUTHORITY: Transactions within the approved allocation may be executed by [the advisor / the Committee]. Any change to the asset allocation targets, the spending rate, the choice of advisor, or this Policy requires [Board / Committee] approval as stated above. SECTION 7 — PROHIBITED INVESTMENTS The Organization will NOT hold the following, regardless of expected return: - Individual speculative or concentrated single-stock positions beyond [10%] of any fund. - Options, futures, short sales, or other derivatives used for speculation. - Purchases on margin or other forms of borrowing to invest. - Cryptocurrency and other digital assets. [Adjust to your board's view.] - Direct ownership of real estate not held for the Organization's own use. - Private placements or illiquid investments without specific Board approval. - Any investment that conflicts with the Organization's mission or values: [list any values-based exclusions here, e.g., specific industries]. SECTION 8 — MONITORING, BENCHMARKS, AND REVIEW The [Committee] will monitor the funds against appropriate benchmarks (for example, a blended index matching the target allocation, such as [%] [equity index] / [%] [bond index]) and will report results to the Board at least [quarterly]. The Board will review this Policy in full at least [annually], and sooner if the Organization's financial situation, the size of its funds, or the needs of its mission change materially. SECTION 9 — UPMIFA PRUDENCE NOTE In most U.S. states, the management and spending of the Organization's institutional funds is governed by the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Under UPMIFA, those responsible for these funds must act in good faith and with the care an ordinarily prudent person in a like position would exercise, and must consider relevant factors — including general economic conditions, the possible effect of inflation, the expected total return of the fund, the Organization's other resources, and the purposes of the Organization and of the fund. UPMIFA also expects the Organization to diversify its investments and to spend from an endowment at a rate that is prudent given the fund's purpose and duration. This Policy is intended to help the Board meet that standard. Nothing in this Policy overrides the specific terms of any donor-restricted gift or any applicable state law. ------------------------------------------------------------------------------- ADOPTION This Investment Policy Statement was adopted by the Board of [Directors / Trustees] of [ORGANIZATION NAME] on [Month Day, Year], and supersedes any prior investment policy. _______________________________ _______________________________ [Name], President / Chair [Name], Secretary _______________________________ _______________________________ [Name], Treasurer [Name], [Investment Committee Chair] =============================================================================== NOTES FOR CHURCHES A church that holds reserves or an endowment is a 501(c)(3) and uses the same investment policy as any other nonprofit. Whether your governing body is called a vestry, a session, a board of trustees, a finance committee, or a deacon board, those people play the role of the board of directors for this Policy and owe the same duty of prudence under UPMIFA. A few church-specific points: - Name each fund and its purpose: building fund, cemetery / perpetual-care fund, memorial endowment, benevolence reserve, general operating reserve. The rules for a fund you may need next year differ from the rules for one meant to last forever. - Respect donor restrictions. A bequest "for the building" or "the income to support youth ministry" must be invested and spent according to its terms, alongside (not mixed with) the general reserves. - If your congregation screens investments against its values, list those exclusions in Section 7 (Prohibited Investments). - Apply the conflict-of-interest rule to investment decisions: no leader may help choose an investment, advisor, bank, or custodian in which they (or a family member) have a financial interest without disclosing it and stepping out of the decision. =============================================================================== ------------------------------------------------------------------------------- This is a general template, not investment or legal advice. The right objectives, risk tolerance, asset allocation, and spending rate depend on your organization's specific situation, and the management of institutional funds is governed by state law (UPMIFA in most states) and the terms of any donor gifts. Consult a qualified investment advisor and an attorney in your state before you adopt or follow this Policy.