Automate manual checks/controls:
Investment managers and their clients negotiate complex agreements detailing the manager’s duties and responsibilities as well as the limits to their investment objectives/discretion.
Any failure by the investment manager to comply with the terms of the agreement they entered could result in expensive compensation as well as client defection.
There are a range of IMA Governance and Compliance solutions determined by investment manager/investor requirements:
Investment Managers/Advisors need to have a controlled process for managing their client portfolios in accordance with each IMA:
Where an IMA specifies and investment process it is necessary to evidence this process. In some occasions the investment process is specified in an investment fund’s prospectus (the prospectus is a contract between the fund and it’s investors).
Examples of an investment process include:
Where an IMA or fund prospectus specifies an investment process then the Investment Manager/Advisor has to evidence that they have followed the contractual process.
IMAs usually contain a section on investment restrictions and guidelines. Most quantitative guidelines/restrictions can be monitored by specific systems such as CRD, ThinkFolio, Bloomberg POMS, Aladdin, etc. However, there are a range of investment restrictions/guidelines which can’t be automated due to a range of reasons, including:
Before making any investment decision/recommendation Investment Managers/Advisors are required to have performed due diligence.
When investing in funds the Investment Manager/Advisor needs to conduct due diligence on the:
Due diligence should be conducted before making an investment decisions/recommendations and periodically thereafter.