RT Journal Article
SR Electronic
T1 Investment Considerations under the Prudent Investor Act
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 50
OP 64
DO 10.3905/jwm.2005.598422
VO 8
IS 3
A1 Darryl L. Meyers
YR 2005
UL https://pm-research.com/content/8/3/50.abstract
AB In Part Two in a series on fiduciary investment matters, the author focuses on how portfolio choice interacts with trust distribution policies to produce wealth flows to current and future trust beneficiaries. The author first frames the discussion through an examination of portfolio effects on beneficiary wealth during an extended period of historical returns. Next, the author examines whether different distribution choices, from simple income-only choices to more complex unitrust methods, can significantly impact wealth flows to beneficiaries. The author finds that in terms of wealth effects to all parties, portfolio choice dominates distribution policy choice over the period examined, although distribution policy can mitigate year-to-year variations in wealth flows. This conclusion leads to a recommendation that fiduciaries should move beyond the traditional balanced portfolio to incorporate asset classes that have a higher risk-return profile to ensure long-term portfolio performance.