All About Estates

Investment Objectives

In a recent Blog I provided some year end metrics against which the investment performance of a Trust portfolio can be measured. Of course, this should be considered in the context of the portfolio objective.

In this Blog I will outline some considerations when selecting an investment objective for a Trust.

In many Trust situations there are competing interests; the life-tenant who would like to maximize income generation and, a different capital beneficiary who would like the Trustee to maximize growth. These competing interests are often addressed by selecting a ‘balanced’ investment objective with 50% invested in fixed income instruments and 50% invested in equity investments which provide an opportunity for growth.

In addition to considering the beneficial interests, a Trustee should also consider the size of the Trust, the Investment horizon and the beneficiaries tolerance for risk. Investment horizon and the size of the Trust are relatviely simple to gauge. Risk tolerance, however, is somewhat more complicated.

It is not automatic that risk means greater reqard. It’s the ‘potential’ to achieve better returns, When discussing risk with clients be aware of the concept the behavioral scientists call the ‘availability heuristic’. This is a reference to individuals making choices based on personal memory of good or bad events rather than basing a decision on realistic probabilities. Individuals are often willing to take on more risk in times when stock markets are performing well. On the other hand individuals who have experienced losses from a bad market will wish to avoid stocks markets.

About Paul Fensom
Scotiatrust offers a full range of estate, trust and philanthropic advisory services designed to meet a client’s personal objectives and designed to evolve across a variety of life stages and financial events. Email: