Estate Living Digital Publication Issue 4 April 2015 | Page 35

Prudence
vs

Performance
Effectively balancing the
tension between prudence
and return means that
wealthy families can have
their cake and eat it too!

caution as part of an overall investment
strategy.” Prudence versus returns for
families Alexander explains that, outside
of the fiduciary context, in the world
of private family capital, legal liabilities
are very different and, therefore, the
relevance we place on process versus
This is according to Grant Alexander, outcome should also be different.
Director of Private Client Holdings, a family
office that specialises in generational Whilst wealthy families are being
wealth management, who says that encouraged to elevate process over
in a fiduciary context much emphasis outcome – believing that sound, prudent
is placed on the ‘prudent man rule’ – a procedures will inevitably lead to good
process-orientated outlook that focuses investment outcomes – this is not always
on how a trustee has behaved and not at the case! Many families have developed
extremely thoughtful, prudent and
how the capital performed.
inclusive procedures, only to find that
“The core of the rule is that a trustee their investment returns are far below par.
is under a duty to the beneficiaries to “A possible explanation is that these
invest and manage the funds of the trust families have overlooked the importance
as a prudent investor would, requiring of ‘opportunity costs’, says Alexander.
the exercise of reasonable skill, care and

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