FTDO: Investment Policy Statement Deep Dive. Lots has happened in the last 4 years.

Summary:  The last few years have been tumultuous and the markets have followed suit -- all after a few decades of declining interest rates and historical deflationary supply change momentum. First Covid, then quantitative easing, quantitative tightening, and now inflationary and interest rate increase environments seem to have created a pivot point that can effect the IPS (Investment Policy Statement) in unforeseen ways. We are finding, specifically now, that reading each word within the IPS and how they interrelate with each other and to a pendulum shift in environment is uncovering inconsistencies that should be addressed.

For starters. To name a few. Does your Investment Policy Statement precisely answer the following questions?

  • Does it accurately define your objectives? Support the institutions short-, mid-, and long-term financial goals for a balanced liquidity risk/reward, for changing interest rate risk environments, for known-unknowns, for changing market environments?
  • Does it outline correctly your institution's investment strategy (philosophy) across investment opportunities including lending, deposits, and asset needs to maximize the balance sheet? Set clear principles for your investment policy statement. This will keep you on course with your investment philosophy.
  • Does it precisely identify institution's your risk tolerance with the potential for abrupt market changes? Investing involves a relationship between risk and reward. Across all investments including level of risk, loan and other default risk, liquidity needs, and such. It’s important to determine your level of risk tolerance.
  • Does it distinctly define your institution's asset allocation limits across changing environments? Asset allocation is about how of much of your money is invested in a specific category of investment (MBS, ABS, Agencies, Muni’s, Treasuries, loans, credit cards, autos, among the many other investment vehicles an institution can invest in). Diversifying your assets should seek to lower the volatility of your entire investment portfolio.
  • Does it concretely describe your institution's investment selection criteria? Determine the criteria you will apply to each type of investment and how they may relate / coexist with each other to better meet your objectives. Apply this criteria test to every investment type and relationship.
  • Does it stipulate a review process and rebalancing across the full institution's range of options to better meet balance sheet desired outcomes over time? During your review process, assess whether your investments meet your IPS criteria. Adjust your investments as necessary and build efficient systems that enable the institution to pivot monthly if needed rather than quarterly or even yearly.

While accurately, correctly, precisely, distinctly, concretely, stipulation, nimbleness, and frequency, may seem like ordinary lexicons, they are imperative to having a proper functioning and unambiguous IPS.

We would be happy to give you a complementary IPS review. Compare it against the best practices we see, and even look for incongruent outliers.

Consider SB Value Partners. At least look under the hood and kick the tires.

We’ve been supporting community financial institutions for almost 30 years. We tend to save our clients a significant amount of money, help them make better trades (through their current relationships), provide better portfolio transparency, provide aggregated risk tools, in-parallel analytics reporting and bond reporting, through seasoned traders and analytics, among other things. We think that you will be impressed by insights coming directly from an institutional trading desk.

Complementary is great value. Take advantage of it.

At SB Value, we are fiduciaries. Fiduciaries are bound to do what is best for their clients. It really does not get more straight forward than that. We demonstrate to our prospects our value up front with live analysis of their portfolio from many different angles. Take advantage of our SB Value Portfolio Analyses and look to better meet Dodd-Frank and the OCC guidance while striving to improve your performance.

As always, consider a first, second, or even third opinion from SB Value Partners by eMailing or calling us back today. Let SB Value help you examine all these, and other methodologies, to build out your future pathways to optimizing your success.

Questions? ASK US HOW to start a complementary analysis now. It’s a great time to get some additional clarity. Learn some additional truths on the front end. It may position your bank for added improvements into 2023 and into a better positioning for 2024. Listen to what a few thought leaders have to say who have written white papers on the topics at hand. Take a read through a few Fact Sheets and SME articles on the subject that we would be happy to provide.

As fiduciaries we see quite a lot – in fact we have recently reviewed just under 17,000 data points from Community Financial Institutions – likely just like yours. We look forward to sharing with you some of what we have learned over the last three decades. In the meantime, we thought we would help with some general information that you and your team can consider right away to round out what you are already doing. There is a lot that’s beneficial, starting with cost savings, yield improvements, potential risk reduction, and likely better balance – even protection. To find out more please click here or go to our website.