Discretionary portfolio management is a service offered by investment professionals who manage portfolios on behalf of their clients. It is a customized investment strategy that is tailored to meet the specific investment objectives of the client. In this agreement, the client authorizes the investment professional to make investment decisions on their behalf, without consulting them for approval.
A discretionary portfolio management agreement is a legal document that outlines the terms of the investment management relationship between the client and the advisor or investment manager. The agreement sets out the scope of services to be provided, the investment objectives, the investment guidelines, and the fee structure.
The investment objectives in a discretionary portfolio management agreement can be broadly classified into two categories – capital appreciation and income generation. Capital appreciation is the goal of increasing the value of the portfolio over time, while income generation aims to provide a regular income stream to the client. The investment guidelines specify the types of securities that can be included in the portfolio, the asset allocation strategy, and the risk management measures to be employed.
The fee structure of a discretionary portfolio management agreement varies depending on the investment manager and the size of the portfolio. The fees are generally charged as a percentage of the total assets under management, and can range from 0.5% to 2.5% annually. In addition, there may be other fees such as transaction costs and performance-based fees.
With a discretionary portfolio management agreement, the investment manager has the authority to make investment decisions on behalf of the client, without the need for prior approval. This allows the investment manager to react quickly to changing market conditions and take advantage of opportunities as they arise. However, this also means that the client has less control over their investments and relies heavily on the expertise of the investment manager.
In conclusion, a discretionary portfolio management agreement is a legal document that outlines the terms of the investment management relationship between the client and the investment manager. It is a customized investment strategy that is tailored to meet the specific investment objectives of the client. The agreement specifies the investment objectives, investment guidelines, and fee structure, and allows the investment manager to make investment decisions on behalf of the client without prior approval.