Investors with capital currently available to invest may have expected that the recent economic downturn would enable them to obtain better terms in commingled funds. The leverage of available capital may have resulted in favorable changes in some terms, but one term that continues to be the subject of extensive negotiation is the sponsor/manager’s “standard of care.” The standard of care describes both the manner in which the manager must perform its responsibilities and the duties the manager owes to the investors. This article discusses various standards of care commonly applied to managers in commingled funds, and what each means to investors.

DUTIES IN GENERAL Managers historically have been viewed as fiduciaries to their investors. The fiduciary obligation of a person handling property or money for others has its origin in trust and agency law. Essentially, the party controlling the management and operation of an enterprise has duties to the