Uniform Prudent Investor Act - UPIA


DEFINITION of 'Uniform Prudent Investor Act - UPIA'

An updated trust investment law that reflects the changes that have occurred in investment practice since the late 1960s, specifically with regard to modern portfolio theory.

The Uniform Prudent Investor Act (UPIA) made five fundamental changes to the previous Prudent Investor Act standard. The most important change was that the standard of prudence would henceforth be applied to any investment in the context of the total portfolio, rather than to individual investments. Another key change was the extension of permission to the trustee to delegate investment management functions, subject to appropriate safeguards; such delegation was expressly forbidden by the former trust law.

BREAKING DOWN 'Uniform Prudent Investor Act - UPIA'

By taking the total portfolio approach and eliminating category restrictions on different types of investments, the UPIA fostered a greater degree of diversification in investment portfolios. It also made it possible for trustees to include in their portfolios investments such as derivatives, commodities and futures. While these investments individually have a relatively higher degree of risk, they could potentially reduce overall portfolio risk and boost returns when considered in a total portfolio context.

  1. Fiduciary

    A fiduciary is a person who acts on behalf of another person, ...
  2. Prudent Investment

    Generally, any use of financial assets that is suitable for the ...
  3. Prudent Investor Rule

    A guideline that requires a fiduciary to invest trust assets ...
  4. Prudent-Person Rule

    A legal maxim restricting the discretion in a client's account ...
  5. Modern Portfolio Theory - MPT

    A theory on how risk-averse investors can construct portfolios ...
  6. Trustee

    A person or firm that holds or administers property or assets ...
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  1. Are UTMA accounts escheatable?

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  3. Can the IRS audit you after a refund?

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  4. Does mutual fund manager tenure matter?

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  5. How does escheatment impact a company?

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