Permissible investments

Permissible investments define the universe a portfolio may draw from. Policies list them under headings such as permissible investments, allowable assets or eligible instruments. Anything outside the list is, in effect, prohibited.

Trustees in England and Wales may make any investment they could make if absolutely entitled to the trust assets (Trustee Act 2000 s3). Land is the exception, apart from loans secured on land. Trustees must still weigh suitability and diversification (s4), and a trust deed or policy can narrow the power.

A permitted list is tested holding by holding. In Acclimetry’s permitted and prohibited investments template, permitted mode returns a breach on any holding outside the allowed universe. Example: where only equities, bonds and cash are allowed, a private fund worth 2.5% of the portfolio breaches at 2.5% offending weight.