When investing and managing trust assets in accordance with the new Prudent Investor Rule, a trust manager should most likely consider which of the following key factors? A) The trust’s performance relative to the benchmark. B) The effects of inflation and deflation. C) The beneficiary’s knowledge of financial concepts. Your answer: A was incorrect. The correct answer was B) The effects of inflation and deflation. A trust manager should consider the effects of anticipated inflation or deflation on the overall performance of the portfolio and make investment decisions accordingly. ummm sooo…performance doesnt matter???
B show NY, i think the idea here is that the manager’s focus should not be just on performance but protecting against broader economic factors as well such as inflation. it’s the whole “chasing performance no-no” deal.
B: nobody cares about beneficiary knowledge. If they didn’t know what a stock was that wouldnt stop you from buying one…performance is not as important as keeping principal preserved or looking for total return.