The past 50 years have seen rapid changes in finance including enormous rises in stock markets, increased inflation, and recently, bouts of extreme volatility in financial markets. It is undeniable that finance now plays a critical role in the global economy. Alongside the rise in its importance, the academic study of finance and financial markets has deepened our understanding of risk, return and market behavior. In particular, Modern Portfolio Theory, a mathematical theory that describes the relationship between risk and return of a financial security, has come to dominate the industry's approach to investing.
These changes and increased understanding necessitated a change in the standard governing a trustee's investments. Previously, trustees were among the more conservative investors in the marketplace. As a result, trusts were not experiencing the historic appreciation of stock markets around the world, and, trustees were finding it increasingly difficult to provide for all income and remainder beneficiaries in the face of rising inflation.
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