How should a trustee measure their prudence in investment decisions?

A trustee's prudence in making investment decisions is measured by considering the circumstances and conduct at the time of the decision. This standard reflects the "prudent investor rule," which emphasizes that a trustee should evaluate investment opportunities based on what a reasonable person would do under similar conditions, rather than solely on the outcome of investments after decisions have been made.

This approach recognizes that investments can be subject to a variety of risks and uncertainties, many of which might not be predictable. Therefore, it is essential for trustees to focus on their decision-making process, taking into account relevant factors such as market conditions, the needs of the beneficiaries, and the diversification of the investment portfolio, all at the time the decision was made. This standard allows trustees to avoid hindsight bias, where they might unfairly judge decisions based only on results, rather than the information available to them at the moment they made those decisions.

Consequently, evaluating a trustee's actions based on the context and knowledge available during the investment decision-making process aligns with the legal expectations for fiduciaries to act with care and diligence.