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Discretionary Fund Management

Do you really have the time and resources for portfolio research ?

    Investment Risk Management

    To achieve successful investment outcomes requires the skills to manage investment risk.

    Even the value of cash erodes over time due to inflation and the rising cost of living.

    This video explains the concept of risk and how it can be managed within a structured, broad based and diversified investment portfolio.

    What is discretionary fund management (DFM) ?

    The problem that many investors face is that the investment landscape is extremely fluid and in constant change.

    Investment funds and investment managers that were appropriate within a broad and diversified portfolio ‘yesterday’ may well not be appropriate today.

    As an investor and without inside knowledge of the financial industry how would you know when key events occur and how would you be able to react to them?


    It could be that the fund mandates originally selected have shifted their risk profile.



    It could be that the fund manager has made some poor selections and performance has been negatively impacted.


    Fund Managers move around often replaced with less experienced individuals

    The role of a DFM manager

    In essence therefore, and in very simplistic terms the role of a discretionary fund manager (DFM) is to 'manage the managers' of a broad investment portfolio.

    A discretionary fund manager is also responsible for a number of tasks that include :

    Initial and ongoing research of funds and their managers

    Performing due diligence activities on the funds, the managers and the jurisdictions where they reside

    Creation of initial client portfolios

    Portfolio reporting

    Continuous portfolio analysis and re-alignment of funds and positions where required

    If you are an existing investor think back and consider how you made your initial investment decisions.

    What objective criteria did you have for your investments

    What research did you employ

    What risk evaluations did you perform

    How did you apply selection criteria

    What on-going monitoring, re-balancing and market assessments are now being applied

    In all probability you may not have had the time nor resources to carry out the above tasks due to a busy lifestyle.

    However in order to obtain the risk adjusted returns you seek it is imperative that such a formulaic approach is adopted - some investors would ask :

    Does a DFM really bring value to the investment portfolio ? - after all most of us have the ability to buy funds, stocks and shares without using a DFM

    Can DFM charges be warranted?

    We believe the answers to these questions are an emphatic YES for the vast majority of investors.

    Contact us now to discover how a DFM service could improve your investment returns.

    Continue reading to take a closer look at :

    What a DFM does

    How they do it

    Value for investors

    Discretionary fund manager processes

    The 5 fundamental tasks that DFM's perform in respect of portfolio creation :


    Due Diligence


    Risk Management


    In-depth fund research

    Discretionary Fund Manager portfolios are diversified not only by underlying investment asset and sector, but also by manager and corporate provider.

    Discretionary Fund Managers believe this research discipline to be an essential element in adding value to investment portfolios and risk diversification.

    Creating “best of breed” multi-manager portfolios requires Discretionary Fund Managers to devote significant resource to fund research and due-diligence.

    The universe of investment funds increase daily.


    Face To Face Meetings

    Discretionary Fund Managers will use numerous databases, sophisticated filters and screens to highlight funds that may be of interest to their investment teams.

    Analysts then conduct peer-group analysis and other desk based research to produce a more targeted group of funds the Discretionary Fund Manager believe worthy of further investigation.

    To understand the strengths and weakness of any fund, its strategy, process or manager requires that a Discretionary Fund Manager conduct face-to-face meetings with fund managers and their counterparts.

    A Discretionary Fund Manager will conduct meetings throughout the year to ensure they are fully comfortable with any fund before it becomes worthy of the Discretionary Fund Managers panel.

    Fund monitoring

    All Discretionary Fund Manager funds are monitored on an ongoing basis and reviewed for consistency and style shift.

    Whilst there have always been a small number of “star” managers or funds which consistently perform regardless of the current market environment these are unfortunately few in number.

    The majority of funds will follow strategies tailored to certain sets of market conditions, whether though market sector or asset class.

    Understanding these synergies and anticipating which, how and when these funds will perform and equally are likely to under-perform are skills developed through many years of experience and implementation of the research process.

    A Discretionary Fund Managers comprehensive fund research reports are continually and critically reviewed and updated.

    Due diligence

    Factors that the research team will closely monitor in terms of a potential fund or fund manager include :

    Regulatory jurisdiction



    The above checks and balances are required to be performed on each and every potential fund to be considered for a client portfolio and will additionally be performed routinely to ensure on-going compliance



    Portfolio Construction Process

    Risk management - a constant review process

    Senior investment management personnel together with the Chief Investment Officer (CIO) meet regularly to direct and supervise the investment management teams who implement the day-to-day investment policy and strategy in pursuit of the investment goals.

    Beyond that, investment management and research teams review economic data and market factors that impact ongoing portfolio risk and performance on a daily basis.

    This consistent process allows managers to make tactical portfolio allocation changes swiftly and decisively should market conditions necessitate it.

    Tactical portfolios changes are generally shorter term in nature.These are used to reduce risk within a portfolio and preserve capital or conversely increase risk to capture more transitory opportunities.

    As part of a Discretionary Fund Managers asset allocation strategy DFM's have the flexibility to change the weightings of the asset allocation within a portfolio. The eventual weightings within a portfolio will be a function of market conditions and investment strategy.

    Frequently Asked Questions

    We hope the above information has provided a clearer understanding as to why we as expat financial planning advisors see true value in our Discretionary Fund Manager partners , TAM International and Momentum Harmony.

    Please get in touch using the contact button below to discuss how a tailored investment solution will be designed to provide the returns you seek.