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The Law of Trusts Is the Foundation for Prudent Fiduciary Investing

Contributor Scott Simon argues virtually every investment fiduciary is governed by the principles laid down in the law of trusts.

In last month's column, I discussed how the father of Modern Portfolio Theory, Nobel laureate Harry Markowitz, unknowingly set out on a course one day in 1950 that would change the nature of investing forever. That day also marked the beginning of a long process in which an understanding of the nature of financial markets and investing increased exponentially, aided especially by the rapid acceleration in computing power.

An important outcome of this process was the great reformation in the law of trusts in the 1980s, 1990s, and 2000s. Modern Portfolio Theory quite literally caused an evolution in the law of trusts.