What is the Prudent Investor Act?
A. The Uniform Prudent Investor Act was adopted in 1992 by the American Law Institute’s Third Restatement of Law of Trusts. The law reflects a “modern portfolio theory” and “total return” approach to exercise fiduciary investment discretion. A fiduciary’s performance is measured on the performance of the entire portfolio, rather than individual investments. Diversification is explicitly required as a duty for prudent fiduciary investing. The Act has been cited as a source of guidelines for state legislatures on fiduciary responsibility. The majority of states have revised “prudent investor” statures.
