Discuss the investment policy approaches adopted by institutional investors

Institutions tend to follow one of several models. The Norway-style model uses mainly passive, public-market exposure with low cost and high transparency. The endowment model allocates heavily to alternatives and active managers to exploit a long horizon and illiquidity premium, but demands strong governance and manager access. The traditional model holds mostly listed equities and bonds with some active management. Liability-driven investing ties the portfolio to liabilities, typical of pensions and insurers, often with a hedging portfolio and a return-seeking portfolio. The choice depends on horizon, liquidity needs, scale, governance resources and the nature of liabilities. The endowment model does not suit an institution without the scale or expertise to access top-tier private managers.