Crafting an investment strategy is the first step within an asset owner’s overall investment process. Asset owners should craft a clear and explicit investment strategy that comprehensively considers: all long-term trends affecting their portfolios, how the fund fulfils the asset owner’s fiduciary duty and how it can operate as efficiently as possible for beneficiaries and other stakeholders.

The strategy process starts broadly, with a wide survey of the external and internal context in which it will be developed (Step 1). This is used to define the organisation’s vision for the future and its mission (Step 2), followed by a more specific set of investment principles (Step 3). The process then narrows in on selecting executable strategies and strategically allocating capital (Step 4). Once completed, the investment strategy will be translated into initiatives for implementation.

As in any change process, communication is a key aspect that should gather feedback from, and share progress with, the right people throughout the project.

The process is as much an art as a science and it is important to take ownership of making it work for your particular organisation. Although each step will start in the order set out, previous steps are likely to be revisited to iterate throughout the process, as new insights may call for reassessment of previous conclusions.

To be effectively embedded in the organisation, any responsible investment considerations must be part of the core investment strategy process. 

Crafting an investment strategy

Key players

Crafting an investment strategy will require many players at different points in the process. The process will take longer if there is any misalignment among key players, including within the board. More details on roles and responsibilities are provided at each relevant stage. Common roles involved in the process are:

  • Board: It is critical that the board is involved in the process at all stages to ensure the investment strategy is right for the organisation, and implementable. The board should play a very active role in the process, such as interacting with external experts.
  • CEO/CIO/CFO and direct reports: The C-suite need to be on side, and will eventually drive implementation.
  • Project sponsor/lead: An executive-level individual should be in charge of the process: commonly a senior director/senior vice president from the investment function, or the director of the strategy department. A team will be tasked with executing the investment strategy (revision) project, led by an individual reporting to the project sponsor.
  • Investment committee: They should give feedback throughout the project, especially on scenarios, and could have heavy involvement depending on the organisation.
  • Investment professionals: They will provide perspective on how the strategy will affect day-to-day investment activities, and will need to be engaged in the process to establish buy-in. (However inertia resulting from an overly-pragmatic focus should not be allowed to dominate the process.)
  • Supporting departments: Other departments around the organisation may need to be consulted.
  • External stakeholders: If investments are indirectly managed it will beneficial to understand current managers’ capabilities to execute future mandates.

Approach for resource-constrained asset owners

Organisations with limited resources are in particular encouraged to use the outlined steps as a guide. Organisations should focus on the aspects within each step that are most relevant to their organisation, including which internal and external stakeholders should be involved. Where some or all governance activities are outsourced (e.g. outsourced CIO, fiduciary management), create clarity around who is responsible for which aspects of the strategy development process.


The process should be on the agenda of at least three board meetings, so will typically take at least nine months, depending on the prior state of the investment strategy and available resources. The strategy should be monitored and best practice is to re-run the overall process every two-to-five years.

Common issues

Some common process or thinking traps to be aware of, and to consider mitigating from the beginning, include:

Process issues

Skipping straight to selecting a strategy without going through the earlier steps (context, vision and mission, principles). Likely to lead to only an incremental change from previous investment strategy.

Examine, understand and remove possible barriers to going through all steps e.g. organisational inertia, change resistance.

Lack of robustness in steps or unwillingness to revisit previous steps if situation warrants.

Provide the right expertise and resources (especially time) for all steps.

Board not aligned due to partial engagement in process or unaddressed differences. Lack of consensus on need for change. Lack of listening to beneficiaries/customers. Failure to include investment professionals’ perspectives.

Implement a timely feedback loop.

Outcome issues

Desire for speed/ease of process leads to cut-and-paste approach that does not tailor the strategy sufficiently.

Identify what is unique about the organisation and emphasise this at the beginning of each step.

The resulting strategy is so high-level that it does not drive change or provide direction on where to focus or how to succeed.

Determine the desired level of depth at the scoping phase and monitor throughout.

The resulting strategy is not sufficiently flexible to contextual changes, and is too prescriptive for investment professionals to operate within.

Include optionality, e.g. potential responses to certain (external) scenarios, and incorporate feedback from investment professionals, e.g. capacity concerns.

Weak supporting evidence and rationale make buy-in difficult during implementation.

Ensure financial and risk modelling is thorough and that there is deep consensus on the inputs used. Perform appropriate stress tests – both contextual and quantitative. Note that supporting evidence may come outside the traditional finance reference environment.

Strategy formulated without a view on how it will be implemented.

Involve sufficient investment professionals in the process, asking what specific initiatives will result from each main point in the strategy.


Insufficient communication is a real risk during a strategy review or strategic change project. A communication plan is needed to cover internal and external communications: communicating progress and gathering feedback, from the right people, throughout the process. Experience shows that communication and information gathering is almost always underestimated.

In particular it is very important to communicate with external stakeholders including beneficiaries/customers, shareholders and outsourced asset managers. The topic of responsible investment can be a powerful tool for engaging with stakeholders.

The plan should be flexible, and adapt to changing circumstances. An initial communication plan should be agreed at the beginning of the process, and then revisited at least once per step to keep it aligned with the strides that are made and the feedback gathered (e.g. confusion from investment professionals, concern from beneficiaries/customers).

Topics to consider

  • Who will be responsible for communicating about the process? Who else will be involved in planning and then executing the communications?
  • What are the current channels and processes for communicating with stakeholders (internal and external)?
  • How is the internal audience segmented (e.g. board, executive team, several groups of employees, works council)?
  • How is the external audience segmented (e.g. beneficiaries/customers, external asset managers, shareholders)?
  • What are the communication plan’s key objectives and key themes at each step?
  • For each audience segment:
  • What are the key messages? What is right frequency and length?
  • Who is sending out the message(s)?
  • What communication channels should be used, and for which purposes?
  • What types of communication should occur early in the process? What should occur once an investment strategy is selected?
  • What is likely to cause anxiety among which stakeholders? How will you relieve this anxiety?
  • How will you collect feedback on the communication and from which groups? What type of feedback will be focused on?
  • Other…

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    How to craft an investment strategy

    March 2018