Corporate trustees’ adaptation to changing conceptions of investment prudence has always been gradual—partly because one of the guidelines in common trust law has always been reference to what others with similar responsibility are doing. Between World War II and the passage of ERISA, trustees moved toward the total return concept, which freed them from holding only dividend-paying common stocks, and away from heavy emphasis on bonds. But trustees only gradually increased their common stock positions as they saw mounting evidence that other trustees shared their confidence in the outlook for common stocks.

Since the passage of ERISA, emphasis has shifted away from stocks and back toward bonds, and away from total return and back toward current income. Also, the distinction in investment objectives between pension plans on one hand and profit-sharing and thrift plans on the other has virtually reversed: Whereas profit-sharing and thrift plans used to be oriented toward the short-term, with heavy investment emphasis on common stocks, today they are being invested more conservatively than pension plans.

Although much of the change represents response to a changing investment environment, ERISA can take credit for the fact that fund managers are analyzing pension plans more comprehensively before setting investment objectives. Investment objectives are becoming more specific and more quantitative—even to the point of locking fund managers into rates of return none of them can achieve with certainty.

It is by no means certain whether the intent of ERISA is to replace the rigid standard of personal trust law with a standard that focuses more on the overall portfolio. The ultimate answer will have grave implications for the availability of capital to smaller, more risky companies.