CFA Level 1: Fiduciary Duties in Pension Plan Management

Who Does a Portfolio Manager Owe Fiduciary Duties?

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Question

Charlice is a portfolio manager who manages (with the help of four analysts) the pension plan assets of Gordon Industries. Charlice received this account four years ago from Gordon Industries Vice President, Michael Burnbaum, who is also in charge of investment oversight. To whom does Charlice owe fiduciary duties?

I. Michael Burnbaum, in his capacity as Gordon Industries' Investment Officer.

II. The employees of Gordon Industries.

III. The pension beneficiaries at Gordon Industries.

Answers

Explanations

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A. B. C. D.

Explanation

A portfolio manager owes fiduciary responsibility to the beneficiaries of the portfolio he is managing. In case of pension plans, the loyalty is not owed to the person who hired the manager or to the entity that set up the fund. Rather, the responsibility lies toward the ultimate plan beneficiaries; in the case of Gordon Industries, it is the pension plan beneficiaries (though not all employees are pension recipients so II is not a valid choice). Standard IV (B.1) - Fiduciary Duties - and the Topical

Study, "Fiduciary Duty."

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