Answer: beneficiaries of the trust

## Explanation In trust relationships, the duty of loyalty is owed to the **beneficiaries of the trust**. This is a fundamental principle in fiduciary relationships: ### Key Points: 1. **Fiduciary Duty**: A portfolio manager acting in a fiduciary capacity has a duty of loyalty to the ultimate beneficiaries, not to the person who hired them. 2. **Trust Structure**: In a trust arrangement: - **Trustee**: Holds legal title to the trust assets - **Beneficiaries**: Hold equitable title and are the ultimate beneficiaries of the trust - **Executive Manager**: Acts as an agent of the trustee 3. **CFA Standards**: Under the CFA Institute Standards of Professional Conduct, investment professionals must place client interests above their own and above the interests of their employer. ### Why not the other options: - **A. Trustee**: While the trustee has legal responsibility, the duty of loyalty flows through to the beneficiaries. - **B. Executive Manager**: The executive manager is an intermediary, not the ultimate beneficiary of the fiduciary relationship. ### Legal Principle**: The duty of loyalty is always owed to the ultimate beneficiaries in a fiduciary relationship, ensuring that their interests are protected above all others.

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