YBG Capital: Should You Use a Discretionary Fund Manager?


First of all, what are we talking about?Discretionary management is a term used to describe a contract between a “principal” and an “agent” for the provision of a service. Investment wise, the principal (the client) entrusts financial assets to an agent (the investment manager) to manage, in line with an outlined investment framework or strategy. This contract requires the involvement of a portfolio manager whom the client delegates to manage assets within a precise framework, taking into account all of the following:the client’s investment goalsthe client’s risk appetitethe client’s investment objectivesMany investors seem to have no issues with delegating the management of a portion of their assets while maintaining the management of another potion independently.“delegate”?Yes, delegation is the main principal of discretionary investing. While investing, just as with every other task in life, there are various reasons someone might seek to delegate:Delegation in form of making use of a discretionary manager gets rid of the stress of constantly making investment/trading decisions on a day to day basis, because in the case of discretionary investing, the manager – rather than the investor – takes the trading and investment choices without permission from the investor.YBG Capital believes you shouldn’t view discretionary investing as something which requires you to be completely passive. Rather, they believe it will still be necessary for you to monitor exactly how your capital is being allocated as well as how well targets are being met, as you will be well placed to do so.The firm says that if you enter a discretionary investment management relationship with them you will be delegating the execution of an agreed overall investment strategy to a firm with the right investment skills and experience – along with the backing of a full research team.But delegating does not necessarily mean losing control. A viewpoint most investors will benefit from understanding is that the benefits of investing can only be experienced through a combination of sagacious management and a systematic allocation of capital. Holding on to control can affect this dynamic and undermine wealth creation.Finding a discretionary manager whose strategy falls in line with yours in terms of asset allocation, risk management and aggression or whose strategy you are willing to accept, would mean you might have given away control on individual trades or investment decisions but still maintain control on the overall investment direction and means by which your capital is invested.What is the advantage from a performance point of view?Coming up with a successful investment or trading strategy requires several years of experience, vast expertise and knowledge of financial markets, access to a wide range of news sources and market data and maybe even costly errors. However, by delegating to professional investment managers, you are taking advantage of professionals that already have the skills, knowledge and expertise who can help improve your overall investment performance to a level you might have been able to achieve on your own.Emma Wall of Morningstar UK, says the main benefit of discretionary fund managers is they are experienced and highly qualified investment professionals managing client’s money. With a discretionary fund manager, she points out investors will enjoy constant monitoring of investment markets and performance, giving them the best chance of maximizing returns. Ms. Wall says discretionary fund managers typically have teams of analysts who meet with the underlying fund managers regularly, analyze investment funds in detail and have access to a wide range of sophisticated investment tools and solutions.ConclusionIn conclusion, discretionary investment managers offer investors the benefit of expertise, time saving and enhanced performance and is a form of investing every sophisticated investor should consider allocating a reasonable portion of their investment portfolio into. 

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