ULC

Management of Institutional Funds Act Summary

The Uniform Management of Institutional Funds Act was promulgated by the Uniform Law Commissioners in 1972, and since has been adopted in 48 states. This act clarifies the right of governing boards to invest funds of such institutions as hospitals and colleges for "total return." This means governing boards could, for example, invest in growth stocks paying low or no dividends but having a high potential for appreciation in long-term value, rather than concentrate entirely on investments with immediate high income yields.

The act also sets a standard of conduct for governing boards of institutions. This would require members to "exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of the action or decision and ... consider long and short term needs of the institution in carrying out its ... purposes, its present and anticipated financial requirements, expected total return on its investments, price level trends, and general economic conditions."

Under this act, governing boards would be allowed to retain professional investment counsel and managers, and to seek removal of restrictions on gifts which have become "obsolete, inappropriate, or impracticable."

The act also defines an "institution" as an "incorporated or unincorporated organization organized and operated exclusively for educational, religious, charitable, or other eleemosynary purposes, or a governmental organization to the extent that it holds funds exclusively for any of these purposes."