For 13 years, I have been co-trustee of a $20 million, small-staffed foundation. I also serve as CEO of Exponent Philanthropy, America’s largest association of funders. Every day, I meet passionate philanthropists who strive to create outsized impact. Without exception, they are good stewards of their philanthropic assets and pay careful attention to best practices in managing financial portfolios.

A detailed investment policy statement (IPS) is one best practice used by foundations and other philanthropists. Using strategies such as diversified allocations, risk assessment, and asset rebalancing, the IPS is well known in the world of foundation investing as a prudent financial management instrument with many benefits: coordinated investments, a focus on specific goals, and clear communication. For example, if your mission involves being able to respond immediately to a natural disaster or emergency, you’ll want to keep a predetermined amount of cash on hand. An IPS provides this direction and increases your opportunities for success.

I contend there is another kind of IPS—relating to grant giving rather than investment strategy—that can serve as a useful guide for philanthropists.

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