UPIA Influences the Investment Practices of Trustees

Max M. Schanzenbach (Benjamin Mazur Professor of Law, Northwestern Law) and Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law) recently published their article entitled The Prudent Investor Rule and Trust Asset Allocation:  An Empirical Analysis, 35 ACTEC J. 314 (2010). 

The Editor’s synopsis is below:

This article reports the results of an empirical study of the effect of the new prudent investor rule on asset allocation by institutional trustees. Using federal banking data spanning 1986 through 1997, the authors find that, after adoption of the new prudent investor rule, institutional trustees held about 1.5 to 4.5 percentage points more stock at the expense of “safe” investments. This shift to stock amounts to a 3 to 10 percent increase in stock holdings and accounts for roughly 10 to 30 percent of the overall increase in stock holdings in the period under study. The authors conclude that the adoption of the new prudent investor rule had a significant effect on trust asset allocation.