• Invest Funds

  • The responsibility and duty to invest assets of the trust is often the main responsibility of the trustee. The choice of type of investment that can be utilized is provided for in the trust document. The trustee has several duties in relation to the investments that he chooses:

    1.Duty to develop a Plan: The document should include a record of the size of the trust corpus, the expected return on these assets, the anticipated distribution schedule, and an anticipated terminal value of the trust.

    2.Duty to monitor risk and return: The document should include the various risk factors a trustee is willing to accept in order to produce the desired rate of return. These factors would include volatility (standard deviation), liquidity risk, marketability risk, and historic draw-down rates of the assets held in trust.

    3.Duty to diversify: The document should include an evaluation of the trust assets allocated among major asset classes in generally accepted Modern Portfolio Theory (stocks v. bonds; large v. small, growth v. value, U.S. v. non-U.S., long-term v. short-term bond, and high v. low credit quality).

    4.Duty to incur costs that are reasonable: The document should record the fees the manager is being paid, the fees charged by the products the manager has selected for the trust, and the fees paid to the custodian who holds the trust assets.

    5.Duty to prudently delegate: The document should record the findings from the trustee’s investigation with the SEC/FINRA that the manager to whom investment duties have been delegated is in good standing, is appropriately licensed, and the trustee has reviewed any complaints or settlements that have occurred between the manager and his or her clients.

    6.Duty to monitor manager’s activities: The document should record the target rate of return the manager is pursuing, a fair “blended benchmark” by which to compare the manager’s performance, and a measure of the risk the trust has accepted for the return that was realized.