Liability-Driven Investment

CHAPTER 10The Statement of Investment Principles

The statement of investment principles, or SIP, is a written statement governing decisions about investments for the purposes of a pension fund. It is the responsibility of the trustees to ensure that the SIP is produced, appropriate and abided by. Trustees or more realistically their investment consultants must prepare, maintain and when appropriate revise the SIP. There is a great deal of legislation governing the production of SIPs and professional help is a necessity for all but the most experienced trustee.

Before updating a SIP, trustees need to consult the sponsoring plan sponsor. In the UK a review of the SIP must take place at least every three years, but also without delay after any significant change in the investment policy.

The pensions regulators high level guidelines are clear.

DRAWING UP A STATEMENT OF INVESTMENT PRINCIPLES

The trustees of most schemes must draw up a written SIP. This sets out the principles governing how decisions about investments must be made.

What the SIP must include

The SIP must include your policy on:

• choosing investments;
• the kinds of investments to be held, and the balance between different kinds of investment;
• risk, including how risk is to be measured and managed, and the expected return on investments;
• realising investments;
• the extent, if at all, you take account of social, environmental or ethical considerations when taking investment decisions; and
• using the rights (including ...