Building a strong foundation - the power of an effective investment policy

You can leave a lasting impact on your organization by creating and maintaining an effective investment policy. Building an effective governance framework around your investment program today can significantly improve investment outcomes for years to come.

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In the fast-paced world of investment management, investment committees and boards often find themselves facing numerous challenges, ranging from market volatility to changing regulations. Establishing a robust investment policy and governance program is essential to navigate this complex landscape successfully. Such a program provides a solid foundation for decision-making, risk management, and aligning investment objectives with organizational goals. In this article, we delve into the benefits of developing an effective investment policy and highlight the key reasons why it should be a top priority for Canadian institutions.

An effective investment policy is necessary to implement a cohesive investment program that aligns with organizational objectives. It is a multi-purpose informative tool that boards and committees can reference on a regular basis.
Jeremy King, Portfolio Manager

Enhancing clarity and alignment

An investment policy serves as a guiding compass, ensuring all stakeholders have a clear understanding of the institution's investment objectives, risk tolerance, and constraints. By articulating a comprehensive investment strategy, the policy helps align investment decisions with the institution's goals. It provides a unified framework for the investment team, management, and board members, fostering a shared vision, and reducing potential conflicts.

Mitigating risks and preserving capital

By defining risk parameters and appropriate risk management strategies, institutions can better protect their capital during turbulent market conditions. The policy should outline diversification guidelines, liquidity requirements, and risk-monitoring mechanisms to safeguard against potential pitfalls and ensure portfolio resilience. By having a well-defined governance structure in place, institutions can contemplate difficult scenarios in advance, proactively address risk-related issues, bolstering investor confidence and giving decision makers permission to stay the course when it’s hardest, during times of increased volatility. 

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Promoting accountability and transparency

An effective investment policy encourages accountability throughout the investment management process. By clearly defining roles, responsibilities, and decision-making frameworks, the program ensures that all stakeholders are aware of their obligations. This transparency fosters a culture of accountability and helps to avoid conflicts of interest. Additionally, a well-structured governance program provides a mechanism for ongoing monitoring, reporting, and disclosure, enabling institutions to demonstrate compliance with regulatory requirements and meet the expectations of stakeholders.

Adapting to evolving market conditions

Markets are dynamic and investment landscapes are constantly evolving. An investment policy should not be a static document; they must be regularly reviewed and adjusted to align with changing market dynamics and evolving institutional needs. By incorporating mechanisms for periodic reviews, the program allows institutions to adapt to new investment opportunities, spending requirements, emerging risks, and regulatory changes. This flexibility enhances agility and responsiveness, enabling institutions to capitalize on market shifts while managing potential downside risks effectively.


In the institutional investment space, an effective investment policy and governance program serve as the bedrock for success. By providing clarity, managing risks, promoting accountability, and adapting to market changes, these programs offer tangible benefits to Canadian institutions. Embracing a well-defined policy and governance structure demonstrates a commitment to prudent and disciplined investment management, instilling trust among stakeholders and strengthening the institution's position in a competitive marketplace.

Contact our team to learn more.

Our Institutional Portfolio Management team has the expertise and resources to help clients build an effective governance program.

This report has been prepared by ATB Investment Management Inc. (ATBIM). ATBIM is registered as a Portfolio Manager across various Canadian securities commissions with the Alberta Securities Commission (ASC) being its principal regulator. ATBIM is also registered as an Investment Fund Manager who manages the Compass Portfolios and the ATBIS Pools. ATBIM is a wholly owned subsidiary of ATB Financial and is a licensed user of the registered trademark ATB Wealth.

Opinions, estimates, and projections contained herein are subject to change without notice, and ATBIM does not undertake to provide updated information should a change occur. The information in this document has been compiled or arrived at from sources believed reliable but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. ATB Financial, ATBIM and ATB Securities Inc. do not accept any liability whatsoever for any losses arising from the use of this report or its contents.

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