An Investment Policy Statement (IPS) typically includes several key components. Which of the following components would most directly outline the acceptable deviation from the strategic asset allocation for different asset classes?

Question: An Investment Policy Statement (IPS) typically includes several key components. Which of the following components would most directly outline the acceptable deviation from the strategic asset allocation for different asset classes?

Answer options:

• Investment objectives, including return and risk targets.
• Performance measurement benchmarks and reporting frequency.
• Permitted and prohibited investments. ✅ Asset allocation ranges and rebalancing procedures.

Correct answer: Asset allocation ranges and rebalancing procedures.

Explanation: Asset allocation ranges define the minimum and maximum percentages for each asset class within the portfolio. This component explicitly sets the boundaries for how much the actual allocation can deviate from the target, and rebalancing procedures state when and how to bring it back in line.