Pension Plan Investment Portfolio Management

Save yourself much time and money by downloading from this page a free sample pension plan investment policy statement that you can edit for your company's pension plan and get you pension investments going fast.

This pension fund investment policy statement was written for a small bank but can easily be adjusted to meet the investment needs of any pension fund. The sample covers all that you need for the effective management of your pension plan investments as can be seen from the outline following:



Policy Outline


Sample Investment Portfolio Management Policy

Investment Policy Purpose and Objectives


The purpose of the Sample Bank Staff Pension Plan, hereafter referred to as the Fund, is to provide retirement income for its employees.


The Fund Managementís primary objective is to seek to diversify the assets of the Fund broadly and expose different segments of the Fund to different investment risks to achieve optimum returns on its investments.

The primary objectives, in priority order include: Safety, Diversification, Liquidity, and Return on Investment.

Funds Management Function

The role of the Investment Manager is to manage the assets of the Fund, by providing the investment/fund management services including: Sourcing of Investments, Investing, Risk management, Monitor investment performance, Reviewing, Reporting / Advising.

Investment Profile for the Fund

Given the nature of the Fund liabilities, as well as the long-term duration of the liabilities, a conservative to a moderate level of investment risk is acceptable.  An asset mix policy favoring a higher investment weighting in bonds relative to equities is prudent.  Some variable income investments, such as, real estate will also be considered, but will represent a small percentage of the investment portfolio.

The following profile is recommended for the Fund:

Investment Horizon:  Medium to Long-term (a mix portfolio)

Projected Use of Funds/Capital:  For fund membersí retirement

Level of Tolerance for Investment Risk:  Conservative/Moderate

Portfolio Blend/Investment Preference:  Optimum yield

Investment Objective:  Capital Growth/Capital Preservation

Investment Style/Approach:  Active Management

All investments will be undertaken with a view to preserving capital and to provide sufficient liquidity to enable the plan to meet all of its current and future obligations as they become payable.

Asset / Portfolio Mix

The long-term asset / portfolio mix will be determined by the following factors:

  1. Demographics of plan membership and the expected future growth.
  2. Projected long-term cash flows.
  3. The correlation between the planís assets, liabilities and cash flows.
  4. The desire to maintain a stable level of contribution for the members.
  5. The historic pattern of equity investments producing higher rates of return than debt investments over the longer term.
  6. The level of changes in demographics.

Benchmark Asset / Portfolio Mix

The sample contains a table with the Benchmark Asset/Portfolio Mix that will be used for the management of the Fund assets.

The Tactical Asset Mix will be reviewed periodically with market conditions, but will be reviewed within the Benchmark Asset Mix, to determine the appropriate allocation to each asset class as necessary for the pension fund investment policy.

Recommended Instruments

The example document presents in table format listings of the assets by class as well as the specific instruments, including, bonds, equities and other variable investments, cash and cash equivalents.

Portfolio Diversification

A diversification strategy is designed to reduce exposure to risk by combining a variety of investments, such as money market securities, stocks, bonds, and real estate, which are unlikely to all move in the same direction.

The objectives of diversification strategy are to:

  1. Reduce the fundís total return variability.
  2. Reduce exposure to any single component of the capital market.
  3. Reduce the risk of not tracking inflation.
  4. Increase the longer-term risk adjusted return potential of the fund.

To achieve diversification, the Fund assets shall be invested as follows, based on the Benchmark Asset/Portfolio Mix.


The percentage weightings for each asset class and instrument will be allowed to vary within reasonable ranges depending upon market conditions.  If rebalancing or re-allocation is required, investment yield and net cash flows will be used to meet the strategic asset allocation targets.  If cash flow is insufficient to meet the target allocation for any asset class or instrument, the Investment Manager will review the situation in consultation with the Fund Trustees.

Categories and Subcategories of Investment

Investments that are permitted shall be classified within the general categories of:

Equity Investments

Bond Investments (Fixed Income Securities)

Real Estate and Other Investments

Investment Manager may utilize pooled or mutual funds that include any of the above categories and subcategories.

Investment Restrictions

Investment restrictions apply within the context of overall Fund objectives and the asset mix policy described above.

The following are Investment Restrictions:

  1. Minimum Quality Standards for Debt Securities in the Fixed Income (Bond) Asset Allocation

Corporate bonds, debentures and other fixed income securities purchased for the Fund must have a good rating (calculated on the financial strength/soundness of the issuing party) or the equivalent thereof according to a recognized bond rating service (S&P/Moodyís etc).

  1. Minimum Quality Standards for Equity Securities in the Equity Asset Allocation

Corporate stocks, IPOs and other equivalent exposures purchased for the Fund must have a good rating (calculated on the financial strength/soundness of the issuing party/Companies).

Prohibited Assets

Prohibited investments include, but are not limited by the following

  • Commodities and Future Contracts
  • Private Placements
  • Options
  • Hedge Funds


Investments shall be made with judgment and care, prudence, discretion and intelligence exercised in the management of the Fund assets.

Rate of Return Objectives

It is expected that the Fund will achieve an annualized total rate of return that will at least be consistent with the annual liability of the Fund based on the actuarial review.  The Investment Manager will seek to achieve much higher returns on investment.


The investment performance of the Fund shall be monitored and reported to the Fund Trustees on a quarterly basis.  The investment performance report shall reflect the Fundís overall realized return each quarter, the asset position and a general asset allocation statement of the Fund investments at the date of the report.  The investment program will be reviewed at least annually to ensure that it continues to achieve the Fundís stated investment objectives and risk tolerance.

Policy Review and Filing

This pension plan investment policy statement shall be reviewed at least once a year and either confirmed or amended as necessary.  All amendments shall be filed with the Pension Fund Trustees within 30 days of amendment.

Acceptance and Adoption

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