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273.605 Standard of conduct in managing and investing institutional fund.
(1)
(2)
(3)
(4)
(5)
Subject to the intent of a donor expressed in a gift instrument, an institution, in
managing and investing an institutional fund, shall consider the charitable purposes
of the institution and the purposes of the institutional fund.
In addition to complying with duty of loyalty imposed by law other than in KRS
273.600 to 273.645, each person responsible for managing and investing an
institutional fund shall manage and invest the fund in good faith and with the care
an ordinarily prudent person in a like position would exercise under similar
circumstances.
In managing and investing an institutional fund, an institution:
(a) May incur only costs that are appropriate and reasonable in relation to the
assets, the purposes of the institution, and the skills available to the
institution; and
(b) Shall make a reasonable effort to verify facts relevant to the management and
investment of the fund.
An institution may pool two (2) or more institutional funds for purposes of
management and investment.
Except as otherwise provided by a gift instrument, the following rules apply:
(a) In managing and investing an institutional fund, the following factors, if
relevant, shall be considered:
1.
General economic conditions;
2.
The possible effect of inflation or deflation;
3.
The expected tax consequences, if any, of investment decisions or
strategies;
4.
The role that each investment or course of action plays within the overall
investment portfolio of the fund;
5.
The expected total return from income and the appreciation of
investments;
6.
Other resources of the institution;
7.
The needs of the institution and the fund to make distributions and to
preserve capital; and
8.
An asset's special relationship or special value, if any, to the charitable
purposes of the institution;
(b) Management and investment decisions about an individual asset shall be made
not in isolation but rather in the context of the institutional fund's portfolio of
investments as a whole and as a part of an overall investment strategy having
risk and return objectives reasonably suited to the fund and to the institution;
(c) Except as otherwise provided by law other than KRS 273.600 to 273.645, an
institution may invest in any kind of property or type of investment consistent
with this section;
(d) An institution shall diversify the investments of an institutional fund unless
(e)
(f)
the institution reasonably determines that, because of special circumstances,
the purposes of the fund are better served without diversification;
Within a reasonable time after receiving property, an institution shall make
and carry out decisions concerning the retention or disposition of the property
or to rebalance a portfolio in order to bring the institutional fund into
compliance with the purposes, terms, and distribution requirements of the
institution as necessary to meet other circumstances of the institution and the
requirements of KRS 273.600 to 273.645; and
A person that has special skills or expertise, or is selected in reliance upon the
person's representation that the person has special skills or expertise, has a
duty to use those skills or that expertise in managing and investing
institutional funds.
Effective: July 15, 2010
History: Created 2010 Ky. Acts ch. 34, sec. 2, effective July 15, 2010.
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