Friday, September 23, 2011

Private Mandate For High Net Worth Client / Corporate

What is Private Mandate Investment?

A lot of times when you talked to fund management company you might heard the world private mandate, personal mandate, discretionary mandate.

What are these technical jargon?

A Private Mandate Investment a service where fund management company (also known as asset management company or investment management company) helps high net worth individual or corporate to invest their money into different asset classes including, equity (stock market), fixed income instrument (bonds, money market), real estate, commodities, forex which ever can bring return to the client.

There are many active investors out there in the market and a lot of them are not full time. When you're not doing it full time, you'll tend to have a risk of missed our opportunity of investment, miss out timing to entry or exit an investment, limited access to news or information of investment.

Who are these investors?
- They can be business man who wanted to invest their money but do not have a time to invest and therefore pass this job to the professional fund manager to help him / her invest.

- They could be company where they have excess of cash to invest but do not know how to invest or how to start.

- They could be pension fund where they have large amount of money and they do not have the expertise in investing in certain asset class.

All these people will need to use a private mandate investment service.

A mandate is a set of orders from the client on his / her preferences, her financial goals, etc. For example a client might want to only invest in Malaysia's stock market and nothing else and he only want his money to be in the blue chip stock market. (that will be a mandate itself).

Fund manager will invest accordingly to the mandate.

Discretionary or Non-Discretionary?
This is a power provided by the client to the fund manager in helping him or her to manage the asset. Discretionary means giving full power over to the fund manager and the fund manager will be able to execute your orders on your behalf.

Non-discretionary meaning at any point when the fund manager will like to execute an order he will need to contact the client.

Most people will choose the discretionary private mandate. After all if they're the professional fund manager would you disagree with them? If you're better than them in analyzing the market or so then you might not want to even consider their service at all.

Of course there will be charges on the private mandate service. These charges are normally set to be between 2% to 10% according to their performance on the return they brought to you.

If they bring you 10% return giving them 2% and you'll still have a 8% return. That's better than 2 years putting into fixed deposit by yourself.

And these does not include the saving you have on having your own software, more expensive retail trading commision, etc

What's the different compare to hedge fund?
Normally fund manager will all utilize their own strategy in investing. They'll all have a set of rules where they follow tightly and also according to their way of analyzing the market. Normal private mandate fund manager will normally only go for long position and that is if you're losing on the investment (at the least, you'll still own the shares) and they'll sell when it is high and buy back when it is low and doing it over and over again.

Hedge fund on the other hand will do anything to get the return they want. They will short the market (selling a stocks he did not own), invest on margin (investing with the money they borrow), etc
It tend to be more risky on hedge fund but when comes to return it will normally get a higher return. Hedge fund also charge a very high fees comparing to any other investment managers and they've set a very high initial investment which might be from millions onwards.

How to select a private mandate investment service?
1. You'll need to understand what is it you need. Meet the manager up and feel comfortable talking to them. Just like selecting a car, you'll some how know whether the sales person is simply bullshit or they do know something that you don't.

2. Look at the fee and negotiate over more towards performance return. It guarantee you return and if you're having money to invest, you don't want the money to be deducted off certain charges, service charges, transaction fee and so on without even start to have a return.

3. Feel comfortable to put in what is your preference. Maybe you don't like risky asset, and maybe you only like something that give certain absolute return over the years. Tell them what you want and they will plan for you.

Many people are investing in Unit Trust.
If you're a person with higher investment amount, invest in private mandate is probably a better choice since your portfolio is design to fit you rather than a collective investment type where they invest on a broader basis and of course the charges are much lower. Of course if you're having only a small amount of money then it would be better off with unit trust.

Private Mandate will need certain minimum investment normally start off with RM250,000 more or less. Too little investment capital will be quite difficult to start the investing because the amount too small, even the fund manager don't know what can they buy.

The above is just my way of explanation to let you understand what is this service. If you do need this service, do talk to me further on this service.

I'm Gan Ken Wei working with an investment management company dealing corporate client and private client on private mandate service, unit trust service, cash management service, etc. I can be contacted via

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