Is Your Florida Trustee Investing In Emerging Markets and Latin America?

Florida trustees need to diversify trust investments and invest “prudently.” After all, Florida has a prudent investor rule which is a rule of conduct for all trustees.

How is your trustee doing? What’s she investing is as the US stock market is on a tear and hitting new highs?

Everyone knows that a trust portfolio should be diversified, but what does that mean?

Diversification can mean spreading out your trust assets across the “investment table” and around the globe.  ….not putting all your trust assets in one basket.   Diversification of trust money can be across countries, company size, industries, and particular asset classes. Trustees investing trust assets might consider everything from Brazil to Mexico, mega companies like Wall Mart or Bank of America, to thinly traded micro caps, real estate companies to manufactures of parts and equipment and so called “alternative assets.”

This week, Barrons, www.barrons.com and the Wall Street Journal, www.wsj.com each ran articles about emerging markets. Barrons asked readers if they were invested in Latin America and if now was the time to buy. Its commentators suggested that purchasing index funds was not the way to capture gains, but rather to carefully select Latin American stocks. The Wall Street Journal considered the recent run up in emerging market (foreign) stocks and asked us if emerging markets were worth the risk.

As I’ve written about numerous times, for the individual Florida trustee, you should not be picking individual stocks. You should hire a corporate trustee. Or, you should be delegating all investment authority to an investment manager (a pro) which Florida’s trust laws refer to as an “investment agent.” However, for the individual trustee who still wants to run things and not give up power, choosing experienced mutual funds and index funds are the best way to diversify trust funds.

While the recent commentary about emerging markets was interesting, and the suggestion of taking a closer look at Latin American stocks important, what can the Florida trustee take away? It’s more important to consider whether it makes sense for your trust, and for your beneficiaries, to be invested in emerging markets and exposed to investment opportunities in Latin America, than what particular foreign stocks to buy.   If foreign stocks make sense, consider what areas of the world you want the Florida trust to invest, and risk, the trust money in. Some commentators suggest diversifying trust funds by investing 10-20% in non US equities. What areas or nations make the most sense?  Consider: is the trust portfolio exposed to Latin American stocks or emerging market stocks and if not, should you have at least some trust money invested there.   In the end, Florida law wants you to have a plan. Florida trustees are not expected to be perfect but you need a strategy.   Considering whether, or whether not, to invest in emerging markets is an important component of a good investment and diversification plan for Florida trustees.