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Fiduciary duty and investment oversight: what trustees are actually accountable for

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Why appointing a competent investment manager is the first step in the trustee’s investment duty, not the last

4 mins
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Foundations Monitor Connect
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Author
tom-wiseman

Tom Wiseman

CEO

Tom is the Chief Executive Officer of Enhance Group overseeing our multi-jurisdictional Monitor and Select solutions from our Jersey headquarters.

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Trustees outsource investment decisions, but they cannot outsource the duty to oversee them. A trustee that appoints a competent investment manager has discharged the first leg of its investment duty; the legal, regulatory and professional duty extends well beyond that, to ongoing oversight of how the manager actually performs, and to documented evidence that the oversight has happened. This article sets out the three components of the investment duty trustees are accountable for, the case law that frames it, and how Enhance’s Monitor service and Connect platform translate the duty into a documented, defensible process.

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Why investment oversight is the trustee’s duty, not the manager’s

A trustee delegating investment management retains the duty to oversee the delegation. The legal position is settled across major trust jurisdictions: a trustee may appoint an investment manager, but cannot delegate away the responsibility for whether that manager is performing the role required by the trust. Bartlett v Barclays Bank Trust Co Ltd [1980] is the foundational English case, still influential in Jersey, Guernsey and across common law trust jurisdictions, establishing that trustees must take active steps to oversee how the trust’s assets are managed, and that blind faith in a professional manager is not a defence.

Statute reinforces the same principle. The Trusts (Jersey) Law 1984 imposes a duty of care on trustees that extends to the supervision of delegated functions. The Trusts (Guernsey) Law 2007 frames the duty in parallel terms. Regulator guidance from the JFSC and equivalent bodies expects documented investment oversight as a core element of trust company conduct. Appointment and oversight are two distinct duties, and a trustee discharges only the first by signing the engagement.

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The three legs of the trustee’s investment duty

01 Appoint

Choose the right manager, on the right mandate

Appointment is the first leg of the duty, and it is more than selecting a brand-name firm. The trustee must choose an investment manager whose style, jurisdictional reach, regulatory standing, fee structure and minimum mandate size are fit for the specific portfolio being managed. Equally important is the mandate itself, the contractual framework under which the manager operates: discretionary or advisory, balanced or growth, in-house or open architecture, and the policy parameters codified in the trustee’s investment policy statement (see IPS: a practical guide). A competent manager appointed on the wrong mandate is not the same as a competent appointment. The trustee’s appointment duty includes both the firm and the framework.

02 Oversee

Test the manager against the trustee’s framework

The second leg is ongoing oversight: a structured, recurring assessment of whether the manager is doing what the trustee asked them to do. Oversight is not a review of the manager’s report; it is an independent test against the trustee’s framework, mandate compliance, IPS parameters, risk-adjusted performance, holdings consistency. This is where most trust companies under-resource: oversight is the part of the duty that consumes the most time, requires the most analytical capability, and is hardest to evidence without specialist support. It is also the part that regulators, auditors and beneficiaries scrutinise most closely. Without it, the trustee has accepted the manager’s framing of the manager’s own performance, which is the opposite of what the duty requires (see Reviews vs reports).

03 Evidence

Document the discharge of fiduciary duties

The third leg is evidencing. A duty discharged without documentation is a duty the trustee cannot defend. Investment oversight must produce a contemporaneous record, the questions raised, the actions taken, the responses received, the conclusions drawn, that survives the scrutiny of a regulator, an auditor, a successor trustee or a beneficiary. The evidencing layer is not optional in modern trust governance: the JFSC Code of Practice for Trust Company Business, equivalent guidance in other jurisdictions, and audit standards everywhere expect a documented, auditable trail of investment oversight. A trustee whose oversight lives in the head of one professional, in scattered emails or in undated spreadsheets has not evidenced the duty. They have remembered it (see Action Points).

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How Monitor and Connect deliver all three legs

Enhance’s Monitor service operationalises each leg of the duty in one disciplined cycle. At the appointment stage, Monitor’s mandate compliance framework provides the structured starting point: every portfolio under monitoring is mapped against its mandate documentation and policy parameters, exposing any mismatch between what was contracted and what is being delivered. At the oversight stage, every portfolio is independently assessed quarterly by a qualified Investment Analyst, with action points raised against every irregularity, mandate breach or underperformance flag. At the evidencing stage, the Connect platform captures the full audit trail, every review, every action point, every response, every resolution, in a date- and user-stamped record that is exportable for regulator, audit or Board use.

The combination is what makes the investment duty defensible. Each leg has the rigour the duty requires; each leg has the documentation the duty demands; and each leg is connected to the others in a single, auditable governance flow.

A practical reading of the duty

The investment duty for trustees can be read as three obligations operating concurrently rather than sequentially. The trustee owes a duty of care in appointment (manager and mandate), a duty of supervision in oversight (independent, structured, periodic), and a duty of record in evidencing (contemporaneous, exportable, accessible). Failure on any one leg compromises the others: a poor appointment cannot be salvaged by good oversight alone; good oversight that isn’t evidenced cannot be defended; and evidencing a manager that was never properly overseen documents a failure rather than a discharge.

The bottom line

You cannot outsource the investment duty. You can outsource investment management, the day-to-day decisions about what to buy and sell. The duty to appoint with care, oversee with rigour and evidence the discharge stays with you. Enhance’s Monitor service and Connect platform discharge each leg of that duty in one cycle, at a fixed cost that does not penalise the size or complexity of the portfolios you oversee.

Simple to implement. Designed for clarity.

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