23. Donovan believes that the Board should emphasize the fundamental long-term considerations related to investment for Bl's plan and deemphasize the shortterm performance aspects. Recognizing that a well-structured investment policy is an essential element in investing, Donovan requests your help in drafting such a document.

a. Discuss why the investment time horizon is of particular importance when setting investment policy for a corporate pension plan.

b. Briefly explain the importance of specifying each of the following when constructing an effective pension investment policy.

(i) an appropriate risk tolerance

(ii) appropriate asset mix guidelines

(iii) the benchmarks to be used for measuring progress toward plan objectives