Fiduciary Governance Blog

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Investment Advisor Annual Review (Duty to Monitor)

A trustee has a duty to act prudently when they delegate investment responsibilities to third parties.

A Trustee’s Duty to Monitor Investment Agents

Duty to Monitor Investment Agents: Section 9(a)(2,3) of the UPIA directs that a trustee shall establish “… the scope and terms of the delegation, consistent with the purposes and terms of the trust [and] periodically reviewing the agent’s overall performance and compliance with the terms of the delegation.”  In response to this duty a prudent…

ERISA 1104(a)(1)(B) re Duty to Prudently Delegate

A trustee has a duty to prudently invest the plan assets on behalf of the beneficiaries. However, few trustees actually take on this complex responsibility alone. In most cases the trustee will…

Trust But Verify: Do Private Equity and Hedge Funds Deliver Superior Risk-adjusted Returns?

For several decades, the investment industry has promoted the virtues of hedge funds and private equity funds for large instructional investors and ultra high net worth individuals. But over the last few years these products have come under increased scrutiny because the hoped-for benefits have, for the most part, not materialized. A report in April…

A Business Manager’s Duty to Monitor the Risk and Return of their Clients’ Investment Portfolios

The Problem: You are a business manager and it is either explicitly or implicitly the case that you are responsible for monitoring the activities of the investment managers that have been entrusted with your clients’ capital. (If you are not a business manager or disagree with this statement, stop reading. This paper does not apply…

Duty to incur reasonable investment costs

Duty to Pay Only Fair Fees: Section 7 of the UPIA directs, “In investing and managing trust assets, a trustee may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee.” It is fundamental to a trustee’s duties to ensure that expenses incurred…

ERISA §1104(a)(1)(C) re Diversification

US Code §1104(a)(1)(C) states, “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries… by diversifying the investments of the plan so as to minimize the risk of large losses…” The court in Marshall v. Glass/Metal (D. Haw. 1980) noted, “Ordinarily the fiduciary should not…

The Trustee’s Compliance Library

Trustees and beneficiaries don’t always see eye-to-eye on issues of trust administration and governance.  For the most part, the reasons for these disagreements are divergent beliefs about responsibility, duty, fairness, and transparency. Then the attorneys are called and nobody wins. At the heart of all of these conflicts is a single issue–did the trustee act…

Case Study – Modifying Trust Distribution Rates

Last month the Anodos team worked on an interesting investment governance project that we thought you might find elucidating. Facts:  A grantor setup a “Net Income” trust in 1987 for the benefit of their grandchild.  The historic distribution rate from this trust, after all administrative expenses, has been 3.2%. (We know this by reviewing the last…