The modernisation of trustees' investment functions in South African law through the implementation of an investment rule based on modern portfolio theory

Thesis (LLD)--Stellenbosch University, 2020.ENGLISH ABSTRACT: Changes in investment management and advances in economics and finance have led to extensive reform of trust investment law in New York, the United Kingdom and New Zealand. The centrepiece of this reform is modern portfolio theory (“MPT”). Today, trustee investing in each of these jurisdictions is governed by an investment rule based on MPT. In contrast, South African trust law has not kept abreast of contemporary changes to trust investment law and, consequently, trustees in South Africa are not judged by an investment rule based on MPT. The purpose of this dissertation is to examine whether trustees’ investment functions in South African law should be modernised through the implementation of an investment rule based on MPT. To this end, the dissertation analyses the development of trustees’ investment standards in South Africa, explains MPT, and compares the theoretical underpinnings of trust investment law as applicable in South Africa vis-à-vis the three foreign jurisdictions mentioned above. The dissertation concludes that trustees and beneficiaries can benefit greatly from modernising trustees’ investment functions and proffers recommendations for reform.AFRIKAANSE OPSOMMING: Veranderinge in beleggingsbestuur en vooruitgang in die ekonomiese en finansiële veld het tot omvattende hervorming van trustbeleggingsreg in New York, die Verenigde Koninkryk en Nieu-Seeland gelei. Die kern van hierdie hervorming is moderne portefeulje teorie (“MPT”). Tans word die wyse waarop trustees in elkeen van hierdie jurisduksies kan belê, beheer deur ’n reël wat op MPT gebaseer is. In teenstelling hiermee, het die Suid-Afrikaanse trustreg nie op hoogte van kontemporêre veranderinge in trustbeleggingsreg gebly nie en gevolglik word trustees in Suid-Afrika nie ingevolge ’n beleggingsreël gebaseer op MPT beoordeel nie. Die oogmerk van hierdie proefskrif is om te ondersoek of trustees se beleggingsfunksies in die Suid-Afrikaanse reg deur die implementering van ’n beleggingsreël gebaseer op MPT gemoderniseer moet word. Om hierdie oogmerk te bereik, analiseer die proefskrif trustees se beleggingstandaarde in Suid-Afrika, verduidelik dit MPT en vergelyk dit die teoretiese onderbou van trustbeleggingsreg soos dit in Suid-Afrika van toepassing is vis-à-vis die drie bogenoemde buitelandse jurisduksies. Die proefskrif bevind dat trustees en begunstigdes groot voordeel uit die modernisering van trustees se beleggingsfunksies kan trek en verskaf dan aanbevelings vir regshervorming in dié verband.Doctora