Why every family office should document its investment philosophy 

Family offices often pride themselves on their discretion, long-term perspective, and values-driven decision-making. But too often, the very principles that underpin investment decisions - the core beliefs about how markets work and how value is created - remain undocumented. They’re understood, perhaps even widely shared among family members and advisers, but they live only in conversations, assumptions, and intuition. 

We would consider this as a missed opportunity. Your investment philosophy is more than a set of abstract ideas. It’s the compass that should guide every financial decision you make - from setting long-term goals to choosing fund managers, to weathering a crisis. Just as GPS satellites help a ship find its course, a clearly articulated investment philosophy helps your family navigate the complexity and opportunities of financial markets and seizing opportunities when they occur.

The first and most important step in building an investment philosophy is documenting what matters most to your family. What are you ultimately trying to achieve and what are the core values you want to underpin your investment decisions? For most families, the answer starts with preserving wealth across generations, but the real picture is always more nuanced. Writing down your objectives brings clarity. It forces a conversation about return expectations, acceptable levels of risk, liquidity requirements, and time horizons and it ensures those conversations are shared, not siloed. These goals should reflect the interests of multiple stakeholders, not just the current generation, and they should be reviewed regularly as needs evolve. Documenting these objectives also lays the foundation for accountability. When goals are written down, they become a reference point in future decisions. They clarify trade-offs and help resolve tensions between short-term preferences and long-term priorities. Most importantly, they remind the family - and their advisers - of the true purpose behind the capital.

An investment philosophy isn’t just about investment beliefs - it’s also about how decisions are made and by whom. Documenting your governance framework means specifying who holds authority, how investment decisions are taken, how decisions are escalated, and what processes exist to challenge or revisit those decisions. This goes beyond organisational charts or investment committee terms of reference. Good documentation captures the spirit of your governance - the values that shape it, the expectations of key roles, and the principles that guide when to act and when to hold steady. 

It’s also essential to document how you intend to monitor implementation. This includes how you manage operational risk, ensure timely rebalancing, and respond to market stress. Tools like liquidity budgets, stress tests, and fire drills should not only be conducted - their results and implications should be recorded and revisited over time. Stewardship, too, deserves a written place in your philosophy. Articulating how you plan to use voting rights, engage with companies, and collaborate with peers ensures that responsible ownership is intentional, not incidental. A documented stewardship approach - complete with escalation protocols and feedback loops - can help create long-term value while aligning investments with your family’s broader values.

Risk is central to investing but how you think about risk is what defines your philosophy. And writing it down helps you sharpen that thinking. Start by defining what types of risk your family is willing to take, and under what conditions. Are you comfortable with volatility if it comes with the prospect of long-term growth? Or is stability of income more important? Do you value diversification even if it means underperforming in certain markets? These questions need clear, documented answers. Your views on asset allocation - the biggest driver of return - should also be recorded. What is your strategic allocation, and why? How often will you review it? What assumptions underpin it? How do you respond when markets deviate from those assumptions? Equally important is how you document your approach to diversification, risk budgeting, and scenario analysis. These tools help translate your philosophy into action but only if they are clearly linked to your views on risk and return. And don’t forget the broader spectrum of risk: liquidity, operational, reputational, regulatory, and increasingly, environmental and social risks. 

Documenting how you assess and prioritise these risks ensures they remain visible in the decision-making process, not just when something goes wrong.

Your investment philosophy should clearly state where you believe value comes from and how you plan to capture it over time. This starts with your objectives and your investment beliefs leading towards a strategic asset allocation, which forms the bedrock of long-term performance. But your documentation should also address when and how you might depart from that baseline. Will you consider dynamic asset allocation? What are the decision rules? How will those calls be evaluated after the fact? Your stance on active management also needs to be spelt out. Do you believe skilled managers can consistently add value? If so, what characteristics do you look for? How will you judge success - by outperformance, consistency, or alignment with your objectives?

Private markets are another area where clarity is crucial. A well-documented philosophy should state why you’re participating in private markets, what part of your overall portfolio you want to allocate to private markets, what risks you’re willing to accept, how you conduct due diligence, and how you evaluate alignment with managers. Finally, families increasingly want to invest in ways that reflect their values - whether that’s addressing climate change, supporting innovation, or promoting inclusive growth. These ambitions should be captured in your investment philosophy as well. Documenting how you think about impact, transition risks, and sustainability ensures these considerations are integrated into your process, not tacked on at the end.

An investment policy including a strong investment governance framework provides structure and clarity in family decision-making, helping to align values and long-term goals. It promotes transparency, accountability, and smoother conflict resolution. Ultimately, it strengthens unity and ensures the family’s legacy and assets are responsibly managed.