SD-01.2 — Investment Mandate & Policy Definition

Business Domain: BD-01 Investment Strategy & Allocation (Front office) · Applies: BOTH

Purpose

Defines the governing mandate of a pool of capital — the objectives, return target, risk appetite, time horizon and constraints a portfolio, fund or account is run to, consolidated into the formal policy document: the investment policy statement, the mandate, or the investment guidelines. The mandate is the contract between the capital and the people who run it. Its origin varies: it may be self-authored — an asset owner writing its own investment policy statement; codified from an inbound institutional mandate — an asset manager translating a negotiated investment-management agreement, or a fund prospectus, into operative guidelines; or codified from an inbound delegated mandate — an OCIO or fiduciary manager that has received the authoring and running of a client’s whole investment strategy under a delegated discretionary mandate, and must itself construct the operative investment policy statement against the client’s retained objectives. The retained-strategy boundary is the model-relevant subtlety of the delegated case: fiduciary duty cannot be fully delegated — the client’s governing body keeps final authority over the objectives and the long-term strategic frame, and the OCIO authors and runs the mandate with delegated discretion within it. Whatever its origin, this Service Domain owns the mandate as an operative artefact.

Service Operations

Define investment objectives and the return target — the return goal, stated as a real-return, liability-relative, peer-relative or absolute-return target per the nature of the capital.
Set risk appetite and tolerances — the volatility tolerance, drawdown limits and other risk the mandate permits.
Define the time horizon and liquidity needs — the horizon of the capital and its near-term cash requirements, as mandate parameters.
Compile the constraint registry — the legal, regulatory, tax, concentration, currency, responsible-investment and unique constraints the mandate imposes.
Codify the governing mandate — consolidate objectives, risk appetite and constraints into the formal policy document.
Translate an inbound institutional mandate — for an asset manager, render a negotiated investment-management agreement or a fund prospectus into operative, monitorable investment guidelines.
Codify an inbound delegated (OCIO / fiduciary-management) mandate — for an OCIO or fiduciary manager, receive the client’s retained objectives and governance frame and author the operative investment policy statement and allocation mandate the OCIO will then run with delegated discretion on the client’s behalf. Distinct from translating an inbound institutional mandate: the delegated mandate transfers the authoring and running of the strategy, not only its execution within a mandate someone else wrote.
Govern mandate amendment — the process and approval gates by which the mandate is changed.

Inputs and outputs

Inputs: the firm’s investment beliefs (SD-01.1); owner, beneficiary or client objectives; the liability or spending profile; regulatory constraints; for a manager, the negotiated investment-management agreement or fund prospectus.
Outputs: the governing mandate of each pool of capital — consumed by the allocation Service Domains SD-01.4 to SD-01.13 (which allocate within it), by BD-10 Investment Compliance & Guideline Monitoring (which monitors against it), and by BD-05 Portfolio Management.

Entities

Consumes: Portfolio / Mandate (E-03); Classification Type & Value (E-11) for the constraint taxonomy; the SD-01.1 firm’s investment beliefs.
Owns: the mandate facet of Portfolio / Mandate (E-03) — SD-01.2 is the authoritative source for the objectives, risk appetite and constraint set a portfolio or mandate carries. The coded, machine-checkable investment restrictions are owned by SD-10.2 Investment Restriction Coding & Rule Library; SD-01.2 owns the mandate they are coded from.

Standards

The CFA Institute Investment Policy Statement framework — objectives (return, risk) and constraints (time horizon, taxes, liquidity, legal and regulatory, unique circumstances).
The ICGN Model Mandate as the reference for the content of an inbound institutional mandate.
The GIPS Guidance Statement for OCIO Portfolios and the pensions-regulator investment-governance guidance — the reference for the delegated (OCIO / fiduciary-management) mandate.

Open extensions

Whether the Mandate should be a first-class entity distinct from the Portfolio it attaches to.
The boundary with SD-10.2 Investment Restriction Coding & Rule Library — where the mandate ends and the coded rule begins.
The boundary with BD-15 — SD-15.7 / SD-15.8 / SD-15.11 win and negotiate an inbound client mandate; SD-01.2 codifies it into objectives and constraints once it exists.