A designated investments agreement is a legally binding document that outlines the terms and conditions surrounding the management of investments made on behalf of a client. The agreement is typically entered into between a client and an investment manager or a financial advisor.
The purpose of a designated investments agreement is to provide clarity on the investment strategy, asset allocation, and risk management approach of the investment manager or financial advisor. It also sets out the responsibilities of each party and the fees or charges associated with the management of the investments.
One of the key components of a designated investments agreement is the investment policy statement (IPS). The IPS outlines the client`s investment objectives, risk tolerance, and liquidity needs. It also includes details on the types of investments that are suitable for the client, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
The investment manager or financial advisor is responsible for developing an investment plan that aligns with the client`s IPS. The plan will typically include details on how the assets will be allocated, how investment decisions will be made, and how the performance of the investments will be measured.
In addition to the investment plan, the designated investments agreement will also set out the responsibilities of each party. The investment manager or financial advisor will be responsible for managing the investments in accordance with the IPS. The client will be responsible for providing all necessary information and instructions to the investment manager or financial advisor.
The designated investments agreement will also outline the fees or charges associated with the management of the investments. This may include management fees, performance fees, and other charges such as transaction fees and custody fees.
Overall, a designated investments agreement is an important document that provides clarity and transparency in the management of investments. It ensures that both the client and the investment manager or financial advisor are aware of their responsibilities and that the investments are managed in accordance with the client`s objectives and risk tolerance.