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Prudent Investment Process

Managers Practices

The Prudent Practices for Investment Managers are for professionals who have discretion to select specific securities for separate accounts, mutual or exchange-traded funds, commingled trusts, and unit trusts.

You can view the Practices below or by downloading the Periodic Table of Global Fiduciary Practices for Investment Managers

Each Practice has been substantiated by international best practices. Detailed Criteria, narrative discussion, practical application, and suggested procedures can be found in the Prudent Practices for Investment Managers handbook, available for download in the Designee Portal. Hard copies can be purchased in the Fiduciary Store


Step 1: Organize

Practice 1.1
Senior management demonstrates expertise in their field, and there is a clear succession plan in place.

Practice 1.2
There are clear lines of authority and accountability, and the mission, operations, and resources operate in a coherent manner.

Practice 1.3
The organization has the capacity to service its client base.

Practice 1.4
Administrative operations are structured to provide accurate and timely support services and are conducted in an independent manner.

Practice 1.5
Information systems and technology are sufficient to support administration, trading, and risk management needs.

Practice 1.6
The organization has developed programs to attract, retain, and motivate key employees.

Practice 1.7
There is a formal structure supporting effective compliance.


Step 2: Formalize

Practice 2.1
The organization provides disclosures which demonstrate there are adequate resources to sustain operations.

Practice 2.2
The organization has a defined business strategy which supports their competitive positioning.

Practice 2.3
There is an effective process for allocating and managing both internal and external resources and vendors.

Practice 2.4
There are effective and appropriate external management controls.

Practice 2.5
The organization has a defined process to control its flow of funds and asset variation.

Practice 2.6
Remuneration of the company and compensation of key decision-makers is aligned with client interests.

Practice 2.7
The organization has responsible and ethical reporting, marketing, and sales practices.

Practice 2.8
There is an effective risk-management process to evaluate both the organization’s business and investment risk.


Step 3: Implement

Practice 3.1
The asset management team operates in a sustainable, balanced, and cohesive manner.

Practice 3.2
The investment system is defined, focused, and consistently adds value.

Practice 3.3
The investment research process is defined, focused, and documented.

Practice 3.4
The portfolio management process for each distinct strategy is clearly defined, focused, and documented.

Practice 3.5
The trade execution process is defined, focused, and documented


Step 4: Monitor

Practice 4.1
There is a defined process for the attribution and reporting of costs, performance, and risk.

Practice 4.2
All aspects of the investment system are monitored and are consistent with assigned mandates.

Practice 4.3
Control procedures are in place to periodically review policies for best execution, “soft dollars,” and proxy voting.

Practice 4.4
There is a process to periodically review the organization’s effectiveness in meeting its fiduciary responsibilities.

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