KRS § 273.605 — KY Code / Title XXIII / Chapter 273 / Section 273.605
273.605 Standard of conduct in managing and investing institutional fund
Status: in_force

273.605 Standard of conduct in managing and investing institutional fund.

(1) Subject to the intent of a donor expressed in a gift instrument, an institution, in

managing and investing an institutional fund, shall consider the charitable purposes

of the institution and the purposes of the institutional fund.

(2) In addition to complying with duty of loyalty imposed by law other than in KRS

273.600 to 273.645, each person responsible for managing and investing an

institutional fund shall manage and invest the fund in good faith and with the care

an ordinarily prudent person in a like position would exercise under similar

circumstances.

(3) In managing and investing an institutional fund, an institution:

(a) May incur only costs that are appropriate and reasonable in relation to the

assets, the purposes of the institution, and the skills available to the

institution; and

(b) Shall make a reasonable effort to verify facts relevant to the management and

investment of the fund.

(4) An institution may pool two (2) or more institutional funds for purposes of

management and investment.

(5) Except as otherwise provided by a gift instrument, the following rules apply:

(a) In managing and investing an institutional fund, the following factors, if

relevant, shall be considered:

1. General economic conditions;

2. The possible effect of inflation or deflation;

3. The expected tax consequences, if any, of investment decisions or

strategies;

4. The role that each investment or course of action plays within the overall

investment portfolio of the fund;

5. The expected total return from income and the appreciation of

investments;

6. Other resources of the institution;

7. The needs of the institution and the fund to make distributions and to

preserve capital; and

8. An asset's special relationship or special value, if any, to the charitable

purposes of the institution;

(b) Management and investment decisions about an individual asset shall be made

not in isolation but rather in the context of the institutional fund's portfolio of

investments as a whole and as a part of an overall investment strategy having

risk and return objectives reasonably suited to the fund and to the institution;

(c) Except as otherwise provided by law other than KRS 273.600 to 273.645, an

institution may invest in any kind of property or type of investment consistent

with this section;

(d) An institution shall diversify the investments of an institutional fund unless

the institution reasonably determines that, because of special circumstances,

the purposes of the fund are better served without diversification;

(e) Within a reasonable time after receiving property, an institution shall make

and carry out decisions concerning the retention or disposition of the property

or to rebalance a portfolio in order to bring the institutional fund into

compliance with the purposes, terms, and distribution requirements of the

institution as necessary to meet other circumstances of the institution and the

requirements of KRS 273.600 to 273.645; and

(f) A person that has special skills or expertise, or is selected in reliance upon the

person's representation that the person has special skills or expertise, has a

duty to use those skills or that expertise in managing and investing

institutional funds.