Discretionary Portfolio Management
Discretionary portfolio management – is a type of asset management performed by a professional manager, whose task is to preserve and increase the value of these funds. The purpose of asset management is to achieve maximum return for the investor at an acceptable risk level.
Term of Investment
The optimal investment term starts with 1-year horizon, because during long periods of time, the securities, in general, show growth and the market efficiency. However, even if you plan to invest for a shorter period of time, our team will select the right product or strategy for you.
Strategy selection and investment
Having decided to invest in discretionary portfolio management, the client fills out a questionnaire to determine own acceptable level of risk and return. Based on this questionnaire, the portfolio manager and the risk-manager determine investment horizon, level of target return and risk for the investment profile agreed with the client. The Company adheres to this document while managing client’s assets.
Client’s funds are placed in different types of securities in various industries. Securities and derivatives are selected at the Investment Committee by experienced managers based on the client's investment profile.
The Company does not have the right to make any guarantees and promises about the future effectiveness and return of asset management. It has the right to publish the historical returns that it has received in previous periods. However, it is important to note that the results of past activities of the portfolio manager do not guarantee future returns. However, the Company makes every effort to obtain a return that is proportionate to or higher than the risk level set by the client.
At the time of signing the investment management agreement, all the information regarding risks tied to asset management activities, is provided to investor. The risks associated with investing in discretionary portfolio management are:
- Systematic risk: affects several financial institutions and their ability to perform their functions.
- Market risk: associates itself in an unfavorable change in prices (value) of financial instruments owned due to changes in the political situation, a sharp devaluation of the currency, a crisis in government debt market, a turmoil in banking industry, force majeure, such as natural disasters and military actions, and as a result, causing decrease in returns or losses. Market risk includes the following: currency risk, interest rate risk, liquidity risk, credit risk and bankruptcy risk of the issuer of security. Depending on the chosen strategy, the market risk will be increasing (decreasing) prices of financial instruments. Clients should be aware that the value of financial instruments owned can both increase and decrease, and its growth in the past does not mean its growth in the future.
- Legal risk: associates itself with the possible negative effects of the approval of legislation, regulations or standards of securities market regulatory organisations, or organisations regulating other sectors of the economy that may directly or indirectly lead to negative consequences for asset values. Legal risk is also associated with changes in tax legislation.
- Operational risk: is the risk of incurring losses as a result of violation of the internal procedures of the Company, errors and unethical actions of its employees, malfunctions of Company’s technical equipment, equipment of its partners, stock exchanges, clearing and other organisations. Operational risk can result in canceled or complicated transactions and cause losses.
Basic principles of risk mitigation
- Availability of an effective real time system of risk management and control.
- Diversification of the investment portfolio by industry and financial instruments.
- Investment limit system.
- Stop-loss and take-profit limits with automated execution control.
- Investment decision making by the Company’s Investment Committee.
A client receives Activity Report prepared by the Company on a quarterly basis, which includes:
- information on the dynamics of a monthly return on the Investment Portfolio for the 12 months preceding the date on which the report was prepared;
- information on the value of the Investment Portfolio, determined at the end of each month, for the 12 months preceding the date on which the report was prepared;
- information on the remuneration paid (to be paid) to the Company
- information on the types of expenses incurred by the Company in relation to the management of the clients’ assets during the reporting period and reimbursed at the expense of clients’ assets;
- other information required by applicable law.
At any convenient time, the client can access the information on portfolio by using Company’s online platform. Also a financial adviser can provide weekly reviews, forecasts and recommendations or reports at the request of the client.
Company's portfolio management fee is calculated individually and is determined based on complexity of the investment solutions. In addition, there are other costs associated with investment management:
- payment for services of credit institutions, including fees for transactions, account maintenance and cash management services;
- payment for services of stock exchanges, clearing organisations, depositories, professional participants of the securities market;
- other expenses related to the maintenance of accounts in which client’s assets are stored and / or recorded, and other expenses related to transactions with client’s assets.