Investors are concerned about conflicts of interest with managers in joint enterprises. To address potential conflicts of interest, investors need a robust manager standard of care that is clearly set forth in the operative documents. Because the standard of care can be modified by contract, investors cannot rely on old-fashioned notions that the manager always must consider what would be best for the investor. Instead, investors need to understand the manager’s duties as set forth in the documents and how they affect the manager’s actions when conflicts of interest arise.

The “standard of care” to which the manager of joint ventures, commingled funds and other enterprises must operate is one of the most significant agreements between the manager and the investors because it describes both the manner in which the manager must perform its responsibilities and the duties to the investors in all circumstances, including conflicts of interest. A series