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The Uniform Prudent Investor Act (UPIA) codified the key process requirements of trustees for the management of trust assets. Unlike the previous prudent man requirements, UPIA looks to modern portfolio theory (MPT) to provide a theoretical framework for making investment decisions. However, MPT is an abstract mathematical model that doesn’t incorporate the practical and operational issues faced by fiduciaries. Understanding this framework is the core concept from which future implementation of the provisions of UPIA will evolve.
MPT: The UPIA Challenge
MPT is a mathematical model of risk, return and diversification. Its key insight is that a collection of risky assets can have an overall level of risk lower than that of each individual ...
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