In recent years, discretionary investment management agreements (DIMAs) have become increasingly popular in Hong Kong. DIMAs provide a way for investors to delegate investment decisions to a professional investment manager, giving them greater flexibility and control over their investments. In this article, we`ll discuss the key aspects of a discretionary investment management agreement in Hong Kong.
What is a Discretionary Investment Management Agreement?
A Discretionary Investment Management Agreement is a contract between an investor and an investment manager. The agreement authorizes the investment manager to make investment decisions on behalf of the investor. This means that the investment manager has the authority to buy and sell securities on the investor`s behalf without having to seek prior approval for each transaction.
One of the key benefits of a DIMA is that it allows investors to delegate investment decisions to a professional investment manager, who has the expertise and experience to make informed investment decisions. This can be particularly beneficial for investors who do not have the time or knowledge to manage their own investments.
Key Terms of a DIMA
There are several key terms that are typically included in a Discretionary Investment Management Agreement:
1. Investment Mandate: The investment mandate sets out the objectives and guidelines for the investment manager. This may include the types of securities that can be invested in, risk parameters, and investment restrictions.
2. Fee Structure: The fee structure sets out how the investment manager will be compensated for their services. This may include a management fee, performance fee, or a combination of both.
3. Reporting Requirements: The reporting requirements set out how often the investment manager will provide reports to the investor on the performance of their investments.
4. Custodian or Broker: The agreement may require the investment manager to use a particular custodian or broker to hold the investor`s assets.
Benefits of a DIMA
There are several benefits to using a Discretionary Investment Management Agreement in Hong Kong:
1. Professional Management: DIMAs allow investors to access professional investment management services, which can help them achieve better investment results.
2. Diversification: Investment managers have the expertise and resources to diversify portfolios, which may help reduce risk.
3. Time-saving: Delegating investment decisions to an investment manager can save investors time and effort.
4. Greater Control: Investors can maintain a high level of control over their investments, with the ability to set investment objectives and guidelines.
Conclusion
Discretionary Investment Management Agreements are becoming increasingly popular in Hong Kong, offering investors a range of benefits including access to professional investment management services, diversification, and greater control over their investments. It is important to ensure that the agreement is carefully drafted with the assistance of legal counsel to ensure that it reflects the investor`s objectives and interests.