N.Y. Not-for-Profit Corporation Law § 552: Standard of conduct in managing and investing an institutional fund

§ 552. Standard of conduct in managing and investing an institutional

fund.

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

an institution, in managing and investing an institutional fund, shall

consider the purposes of the institution and the purposes of the

institutional fund.

(b) In addition to complying with the duty of loyalty imposed by law

other than this article, 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.

(c) In managing and investing an institutional fund, an institution

consistent with section 717 (Duty of Directors and Officers):

(1) 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

(2) shall make a reasonable effort to verify facts relevant to the

management and investment of the fund.

(d) An institution may pool two or more institutional funds for

purposes of management and investment.

(e) Except as otherwise provided by a gift instrument, the following

rules apply:

(1) In managing and investing an institutional fund, the following

factors, if relevant, must be considered: (A) general economic

conditions; (B) the possible effect of inflation or deflation; (C) the

expected tax consequences, if any, of investment decisions or

strategies; (D) the role that each investment or course of action plays

within the overall investment portfolio of the fund; (E) the expected

total return from income and the appreciation of investments; (F) other

resources of the institution; (G) the needs of the institution and the

fund to make distributions and to preserve capital; and (H) an asset's

special relationship or special value, if any, to the purposes of the

institution.

(2) Management and investment decisions about an individual asset must

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.

(3) Except as otherwise provided by law other than this article, an

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

consistent with this article.

(4) An institution shall diversify the investments of an institutional

fund unless the institution prudently determines that, because of

special circumstances, the purposes of the fund are better served

without diversification. An institution shall review a decision not to

diversify as frequently as circumstances require, but at least annually.

(5) 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 this

article.

(6) 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.

(f) Each institution shall adopt a written investment policy setting

forth guidelines on investments and delegation of management and

investment functions in accord with the standards of this article.