Wednesday, May 29, 2013

Fiduciary Duty Requires Fiduciary Returns

The advocacy group is presenting its Blueprint for Sustainable Investing to its Investor Network on Climate Risk.

OECD is publishing its High-Level Principles of Long-Term Investment Financing by Institutional Investors.

These organizations and others in the legal profession generally are calling for a re-consideration of the rules of fiduciary duty as they impact the rights and responsibilities of pension plans and other stewards of large, purposeful, perpetual pools of entrusted corpus held to sustain the payment of chartered benefits to successive generations of extensive populations of entitled or intended beneficiaries.

Corpus + benefits. These are the fiduciary duties of these quasi-public trusts.

They need fiduciary returns to match those fiduciary duties, i.e. returns that sustain corpus while paying benefits.

How are they going to get those returns?

Experience since the 1972 Uniform Management of Institutional Funds Act was first passed has shown they cannot get them by speculating on valuations through the transient ownership of trading positions in public shareholdings, or their private-market alternatives.

What are we going to try next?

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