Consultants often invest all or part of their accounts in investment funds, hedge funds, bank funds and other bundled vehicles. These vehicles can be managed by an unrelated consultant or manager. Consultants can also enter into contracts with unrelated managers to invest all or part of your assets as a separate account. All of these arrangements support their own expenses, which are redirected to your account. You should understand the magnitude and structure of these expenses and check whether the advisory fees are properly offset by the fees paid to the administrator of the bundled vehicle or to a separate account. You should also be satisfied with the consultant`s diligence on all unrelated managers (to avoid the Madoff situation). The investment management agreement expired on February 28, 2014 and KBR no longer has an investment manager of the company on the same date. The agreement or annex to the agreement should include investment guidelines under which the account is managed. These guidelines should not only define the account`s investment objective (for example. B the valuation of capital), but also all investment allocations (.
B for example, a target of 60% equity and 40% debt) and investment restrictions (for example, no more. B of 20% in foreign securities, only investment degree debts, no derivatives). You would like to discuss with the advisor the initial directions that you must follow in the current circumstances and risk tolerances, and review these guidelines on a regular basis. Investment rules are the primary means of monitoring the consultant`s activities, so you should make sure they are clear and comfortable with them. Agreements between an investment advisor and his client will be translated into an investment management agreement. While the advisor usually announces his or her own form of agreement, the client must make certain decisions, can negotiate certain points and must in any case understand the fundamental terms of the agreement. If you are the client, some of the basic conditions you wish to consider are: Investment management agreements generally provide that the advisor is not liable to the client if he is not deliberate, in bad faith, simple or serious negligence and/or breach of the trust obligation. Some agreements may also provide that the client compensates the advisor for third-party claims. While you should try to reduce these types of rules, advisors tend to resist significant changes. In addition, consultants are not allowed to limit debts they would otherwise have under securities legislation.
Each investment manager has been appointed under an investment management agreement with the management company and the company, which can be modified from time to time to ensure the day-to-day management of the company`s investments, subject to overall supervision and responsibility of the management company. If you have any questions about any of the issues raised in this newsletter, contact André Brewster at 415.677.6255 or your usual lawyer Howard Rice. The agreement should specify the nature and frequency of written and oral reports.