End-Users

Abstract

Abstract In considering the investment management industry, difficult questions often arise as to the classification of investment vehicles in terms of their structure and the regulation to which they are subject, and regulation in part determines whether or not derivatives can be used, and the extent to which and the manner in which derivatives can be used. A crude distinction can be drawn between an arrangement for the management of a portfolio of investments carried out under a mandate, and a pooled investment arrangement. The management of a portfolio of investments under a mandate is usually undertaken either for individuals who enjoy substantial wealth or for institutions including pension schemes and charities. The management of a portfolio under a mandate is undertaken either by investment professionals who are employed for that purpose, such as the staff of a family office, or by an investment management firm. Many stockbrokers and private banks offer investment management services, often in conjunction with more general wealth management and estate planning services. An investment management firm accepting a mandate to manage a portfolio generally enters into an investment management agreement with the client, which specifies the methodology by which the client’s portfolio is to be managed. The investment management agreement should address matters such as the different types of asset which qualify for inclusion in the portfolio, the extent to which the portfolio is to be diversified, the degree of risk to which the portfolio is to be exposed, the use of derivatives and borrowing, any benchmark by which the performance.