Someone left a comment on one of my posts last week that got me thinking. He said most family offices are founded by entrepreneurs, and that "entrepreneurs find the whole idea of an investment policy statement nauseating at best. Limiting, even".

I understood the reaction.

Founders spend years learning to trust their intuition, move quickly, and back their own judgement. Then the business sells, the capital arrives, and the industry hands them a forty-page document written for trustees and committees. That type of investment policy statement exists so an institution can deploy money on behalf of people it has never met. To hold people accountable against the rules of engagement.

So I agree with him about the policy document. Where I would push back is on what gets thrown out with it.

What happens when your objectives, your investment thesis, your risk tolerance, liquidity needs, and how you decide exists only in your head? How does anyone else act on it?

Three managers

Take a founder who outsources much of the investment management to three external advisers. A wealth manager on the liquid portfolio. A bank running fixed income. Someone sourcing alternatives, while maintaining some direct private investing in-house.

The experts are good at what they do. All three asked about objectives and risk tolerance at some point, and all three came away with an impression, shaped by the conversation and by what they happen to sell.

They may all have heard "growth, with sensible risk."

But how much cash needs to stay available? How much of the family's wealth can be locked up for ten years? How much exposure to the same sector is acceptable across all three mandates at once?

Those are questions about the whole portfolio. Each manager only sees a piece of it.

So every one of them can do good work inside their own remit while the combined result drifts away from what the family actually needs. The only person who can see that drift is the Principal, who then reconciles every recommendation personally.

A written brief does not constrain those advisers. It gives them a common starting point, and it gives you a way to check whether the pieces still add up.

It isn't a decision

If you manage any part of the investments yourself, the decision is the part you will keep close. It is where your experience and judgement are worth the most. Nothing that I suggest here should take that away from you.

But look at what sits around a single investment. Manager due diligence. Onboarding a new fund. A capital call arrives, and someone has to confirm the entity, check the amount against the commitment, find the cash, arrange the payment, file the evidence, and update the record.

None of that is an investment decision. It is operational work, and it follows the same sequence every time.

When the sequence is not written down, it comes to you anyway. Not because anyone needs your judgement, but because nobody else knows what happens next. You are being used as a procedure manual.

Most founders I meet are not running large teams. There is usually a chief of staff, or two or three people sitting between the Principal and everything else. Those people can run the operational layer perfectly well. What they cannot do is invent it. Anything that has never been written down turns into a question, and every question turns into an interruption.

That is how a founder ends up as the bottleneck on the legwork while also being the decision maker on the judgement. The second is correct. The first is an accident.

The judgement stays with you. The orchestration should not.

The one page

You don't need a forty-page investment policy document. Write a page or two in a simple language, answering five key questions.

What must this capital do. The purpose before the return target. Family spending and income needs, preserving buying power, funding the next venture, or some mix. Put a number and a timeframe against it. "CPI plus three per cent over rolling five-year periods" gives a manager something to aim at, and gives you something to measure later.

What decline you can carry. Over what period, and what would trigger a review. Work out what that fall means in money terms, and in the family's ability to meet its commitments.

Where the boundaries sit. What you will hold, and the limits on concentration and leverage. "Maximum five per cent in one position" is something a manager can apply. "We are cautious about concentration" leaves them to invent their own definition.

How cash needs get met. The liquidity you need for spending and commitments, and the order in which assets get sold if more is required. Decide that while you still have time to think about it. Under pressure, the easiest thing to sell becomes the default.

What can proceed without you. This is the question that gives you time back. Funding an approved capital call, completing onboarding, gathering diligence material, updating the records. Write the process once and it stops arriving in your inbox.

Then walk through it with the people who will actually use it, and ask how they would apply it to a live decision. Wherever they disagree with you is the part that is not clear yet.

Break the rules

Opportunities will turn up that sit outside what you wrote. Some of them will be worth taking.

Take them. Then write down what you approved, when, and why.

That record matters once the exceptions start repeating. Sometimes it shows a rule that no longer fits your objectives, and the rule should change. Sometimes it shows a boundary you abandon every time something attractive appears. Those are different problems, and the log is how you tell them apart.

I call this a Capital Operating System rather than an investment policy statement. Policy sounds like something imposed on you. Statement sounds like something filed. Founders hear both and switch off, before anyone gets to what the thing actually does.

Capital Operating System describes the job better. It systemises your decision-making. Documents workflows. It coordinates the people around you, keeps routine work moving without you, and leaves a record you can learn from.

The comment was fair. Paperwork that adds nothing to the way you work deserves to be rejected.

Here is the test I would use instead. Ask each of the investment professionals you work with separately what your capital is for, and which decisions they can take without coming to you.

If the answers do not match, you know where to start.

Here’s to a good week ahead.

— Amin Naj