https://en.wikipedia.org/wiki/Uniform_Prudent_Investor_Act
What Is the of Uniform Prudent Investor Act?
The Uniform Prudent Investor Act (UPIA) is a uniform statute that sets out guidelines for trustees to follow when investing trust assets. It is an update to the previous prudent man standards intended to reflect the changes that have occurred in investment practice since the late 1960s. Specifically, the Uniform Prudent Investor Act reflects a modern portfolio theory (MPT) and total return approach to the exercise of fiduciary investment discretion.
Understanding Uniform Prudent Investor Act (UPIA)
The Uniform Prudent Investor Act was adopted in 1992 by the American Law Institute’s Third Restatement of the Law of Trusts. It was an update to the previously accepted Prudent Man Rule. By taking the total portfolio approach and eliminating category restrictions on different types of investments, the Uniform Prudent Investor Act fostered a greater degree of diversification in investment portfolios. It also made it possible for trustees to include in their portfolios investments such as derivatives, commodities, and futures. While these investments individually have a relatively higher degree of risk, they could theoretically reduce overall portfolio risk and boost returns when considered in a total portfolio context.