Investment Policy Statement for XYZ Foundation

XYZ Foundation is a mid-sized charitable organization with a long-term investment horizon and an endowment of $300 million. The foundation is dedicated to providing educational scholarships and community support programs. The Board of Directors is currently reviewing its investment policy statement (IPS) to ensure alignment with its financial goals, risk tolerance, and spending requirements.

As a portfolio manager, you have been asked to address the following questions regarding the XYZ Foundation's investment strategy:

1. Discuss the key considerations when developing an investment policy statement for the XYZ Foundation.

2. Explain the appropriate asset allocation strategy for the foundation, considering its long-term objectives and liquidity needs.

In your response, be sure to provide detailed reasoning for your recommendations, and consider any regulatory or tax implications that may affect the foundation’s investment decisions.