§ 18-12.1-3 - Standard of conduct in managing and investing institutional fund.
SECTION 18-12.1-3
§ 18-12.1-3 Standard of conduct inmanaging and investing institutional fund. – (a) Subject to the intent of a donor expressed in a gift instrument, aninstitution, in managing and investing an institutional fund, shall considerthe charitable purposes of the institution and the purposes of theinstitutional fund.
(b) In addition to complying with the duty of loyalty imposedby law other than this chapter, each person responsible for managing andinvesting an institutional fund shall manage and invest the fund in good faithand with the care an ordinarily prudent person in a like position wouldexercise under similar circumstances.
(c) In managing and investing an institutional fund, aninstitution:
(1) May incur only costs that are appropriate and reasonablein relation to the assets, the purposes of the institution, and the skillsavailable to the institution; and
(2) Shall make a reasonable effort to verify facts relevantto the management and investment of the fund.
(d) An institution may pool two (2) or more institutionalfunds for purposes of management and investment.
(e) Except as otherwise provided by a gift instrument, thefollowing rules apply:
(1) In managing and investing an institutional fund, thefollowing factors, if relevant, must be considered:
(i) General economic conditions;
(ii) The possible effect of inflation or deflation;
(iii) The expected tax consequences, if any, of investmentdecisions or strategies;
(iv) The role that each investment or course of action playswithin the overall investment portfolio of the fund;
(v) The expected total return from income and theappreciation of investments;
(vi) Other resources of the institution;
(vii) The needs of the institution and the fund to makedistributions and to preserve capital; and
(viii) An asset's special relationship or special value, ifany, to the charitable purposes of the institution.
(2) Management and investment decisions about an individualasset must be made not in isolation but rather in the context of theinstitutional fund's portfolio of investments as a whole and as a part of anoverall investment strategy having risk and return objectives reasonably suitedto the fund and to the institution.
(3) Except as otherwise provided by law other than thischapter, an institution may invest in any kind of property or type ofinvestment consistent with this section.
(4) An institution shall diversify the investments of aninstitutional fund unless the institution reasonably determines that, becauseof special circumstances, the purposes of the fund are better served withoutdiversification.
(5) Within a reasonable time after receiving property, aninstitution shall make and carry out decisions concerning the retention ordisposition of the property or to rebalance a portfolio, in order to bring theinstitutional fund into compliance with the purposes, terms, and distributionrequirements of the institution as necessary to meet other circumstances of theinstitution and the requirements of this chapter.
(6) A person that has special skills or expertise, or isselected in reliance upon the person's representation that the person hasspecial skills or expertise, has a duty to use those skills or that expertisein managing and investing institutional funds.