In an IPS, what would be included in assessing liquidity?

In an Investment Policy Statement (IPS), assessing liquidity is crucial because it directly relates to an investor's ability to meet cash needs as they arise. Liquidity refers to how quickly and easily assets can be converted into cash without significantly affecting their price.

Focusing on the ability to meet cash needs ensures that the investor can cover immediate obligations or unexpected expenses, which is a fundamental aspect of managing a portfolio. For instance, if an investor has significant cash flow requirements, the IPS should reflect strategies that maintain adequate liquidity, such as a proportion of assets in cash or cash-equivalents.

Therefore, the consideration of liquidity within an IPS goes beyond merely holding onto long-term assets or frequently trading securities. It is about ensuring there is always enough readily available capital to satisfy short-term requirements, thereby providing financial flexibility. This makes the assessment of the ability to meet cash needs an integral part of the liquidity analysis in an IPS.