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Discretionary Fund Management

Do you honestly have the time and resources for research?

What is discretionary fund management (DFM)?

The problem that most investors face is that the investment landscape is extremely fluid and in a constant state of flux.

Investment funds and investment fund managers that were appropriate ‘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, such as a favoured fund manager leaving an investment house or when portfolio mandates change that impact the risks associated with an investment and how would you be able to react to them?

The simple fact is that keeping abreast of the global equity markets, international currencies, company data and investment firm personnel changes takes time (a great deal of time) and a great deal of resources too.

Discretionary investment fund managers employ highly skilled teams of researchers that work around the clock to gather and interpret data such as financial and geo-political, in order to formulate risk adjusted investment portfolios from a universe of funds that exists in their thousands.

Consider then that If these tasks require the expertise of highly skilled professionals working full time, it's hardly surprising that the burden of maintaining satisfactory investment outcomes is beyond all but a few private investors.

For the vast majority of investors therefore, discretionary fund management is an ideal solution to gaining cost effective professional help to achieve the risk adjusted returns sought by investors.

If you have questions or would like to discover how a discretionary managed portfolio could improve your nett returns please get in touch.

Investment risk management

To achieve successful investment outcomes, investment management skill sets are required.

Remember 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.

Learn about the processes and procedures of a discretionary fund manager

Discretionary fund managers are detail driven and operate highly efficient structures and procedures in order to construct risk adjusted portfolios for their investors.

We proudly partner with some of the global leaders in the discretionary fund management world that include the multi-award winning TAM International and Momentum Global Investment Managers (MGIM)

The following sections provide detail as to how most of the discretionary fund managers work behind the scenes.


    It’s not uncommon for fund mandates to change, however you may find that its risk profile becomes out of sync with yours.



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


    Fund Managers are often recruited from competing firms and very 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.

    Learn more about the Discretionary Fund Management processes & procedures

    Continue reading to gain further insight to discover how discretionary fund managers operate and the value they bring to investors portfolios.

    Discretionary fund manager processes

    The 5 fundamental tasks

    In respect of portfolio creation are DFM's are responsible for :

    • Research.
    • Due Diligence.
    • Strategy.
    • Risk Management.
    • Portfolio Construction.

    5 Fundamental DFM Tasks

    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 is 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.

    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.
    • Compliance..
    • Liquidity.

    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


    Due Diligence Processes


    Discretionary Fund Managers believe value extraction is best achieved through medium to long-term strategic allocation to sectors and asset classes best poised to generate the risk/reward they require over these periods.

    A portfolio selection implies a strategic asset allocation and boundaries around which this allocation can be changed.

    There are often occasions when a Discretionary Fund Manager will recognise increased risk or increased opportunity potential within the financial markets.

    Within this strategic framework therefore a Discretionary Fund Manager can make short and medium term tactical allocation decisions to ensure that portfolios remain responsive to prevailing market conditions.

    Often, rather than simply making marginal decisions, a Discretionary Fund Manager will make firm market calls and if necessary act decisively and alter portfolios to reflect the current investment environment


    Portfolio Construction Process

    Risk management is 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.


    Portfolio Monitoring

    Frequently asked questions (FAQ's)

    We hope the above information has provided a clearer understanding as to why we as expat financial planning advisors see true value in Discretionary Fund Management and even more so in our preferred partners, TAM International and Momentum Global Investment Management (MGIM)

    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.