The fiduciary responsibilities of trust managers are drawn in the main from state law on personal trusts, from case law, from Scott's Law of Trusts and from the American Law Institute's Restatement (Second) of Trusts. Charitable organizations and private foundations are subject, respectively, to the Uniform Management of Institutional Funds Act of 1972 (UMIFA) and the regulations under Section 4944 of the Internal Revenue Code. The Employee Retirement Income Security Act of 1974 (ERISA), although it applies specifically to pension fiduciaries, provides a primary source of statutory guidance for all fiduciaries because of the large dollar value of assets invested in pension funds and the fact that the Act represents a codification of trust and common law.

Fiduciary responsibilities fall into two generic categories the duty of undivided loyalty, covering rules and regulations designed to minimize conflicts of interest, and the standard of reasonable care (prudence). Standards of prudence have gradually evolved from the prudent man rule into the prudent expert standard of ERISA. Yet legal interpretations of prudence have lagged advances in portfolio theory and practice. In particular, recent empirical studies showing that long-term investment performance depends primarily on asset allocation policy support the total portfolio approach to measuring prudence.