The important reasons for constructing a policy statement would be option D. Choices A and B as investor's realistic decisions and measuring the manager's performance both are important and can be done by this.
The investment policy statement is a planning and communication document that
- finalizes the understanding between client and manager
- Incorporates a client's requirements, choices, and circumstances to create an integrated statement that reflects the objective and constraints of the client.
So, it will help the investment process to an investor to identify and make decisions on setting realistic goals. This also makes a standard or scale to which the portfolio manager can be judged for his performance evaluation.
Thus, the correct answer is - option D. choices A and B.
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