What Are The Benefits Of Managed Discretionary Accounts (MDAs)
The managed funds industry, and the MDAs niche, in particular, has reported a spike in popularity in the past few months. And we believe that much of this interest is attributable to the transparency and flexibility offered by MDAs.
By investing in an MDA, you eliminate the time-consuming and unnecessary back-and-forth that would otherwise be necessary every time the investment manager needs to buy, sell, or redeem other investments.
An MDA is a portfolio management service in which an investment professional invests your assets on your behalf. These professionals are referred to as investment account managers. They are tasked with identifying profitable trading instruments where they can invest your capital and manage your MDA account.
In this comparative guide, we go over the key benefits of opening a managed discretionary account.
Benefits of MDAs
Access to experienced professionals:
By choosing to invest in an MDA, you get direct access to a highly experienced investment manager. These investment managers are well versed with different types of investments and financial instruments. They are experts in researching investment products and coming up with highly effective trading strategies.
To keep up to date with the investment niche, these professionals are constantly monitoring such investment vehicles as stocks, bonds, forex, derivatives, and options. This, in effect, explains the regular, and discretionary, organisation and reorganisation of investment profiles.
These professionals, however, aren’t just great in investment product selection. They are also typically experts in the active management of your MDA. They let you concentrate on the more important aspects of your life by reacting proactively to the continually changing market conditions.
You can look at an MDA investment as a relatively hands-off investment option. The account manager does all the heavy lifting by exploring and keeping tabs on promising opportunities. Your manager is dedicated to putting your investment to work and earning you a financial return.
Quick to set up:
A managed Discretionary account is also quick to set up. At Symbiosis Capital for instance, we have oversimplified the investment process and broken into just a few steps. Start by visiting our website and creating an account with us.
After account registration, Symbiosis Capital will present you with three MDA investment alternatives. They each have a different risk-to-reward ratio, maximum risk exposure, and annual targeted return rates. We will send you the Investment Program documents that detail our offerings, risks, and everything in between.
Once satisfied with our program offer and ready to proceed, we will send two documents your way for signing. First is the client service agreement that details what we can and cannot do. The second is a 3-way limited power of attorney which says that we can trade on your behalf.
It also says that your broker can deduct our performance fees at the start of a new month for the past month’s account management. And after you sign these documents, one of our team members will contact you via Zoom. They will guide you on how to create a brokerage account with one of our approved brokers.
They will also expound on some basic housekeeping like performance reporting and risks. After this, the account need only be approved by our compliance officer after which we can connect to it and start trading. This process takes less than 90 minutes from whence you can start receiving monthly account performance reports.
Managed Discretionary Accounts are not as opaque as managed investment schemes. They are highly transparent and you will always know the composition of your investment portfolio at any given time. You always know what your money is doing and when. Your preferred broker will also send regular updates on the performance of your portfolio.
In the first week of the month, your broker will send you the trading performance report for the past month. It outlines such important aspects of your account as the investment products pooled into your portfolio and account balances.
A Managed Discretionary Account is also highly liquid. You are free to add to your investment at any time. You are also at liberty to close the account – at any time – should it not match your expectations. Today, most MDA managers will not ask you to file complex withdrawal or exit papers.
Your broker will, however, require you to give them a short notice for withdrawals. They need it to close pending trades and redeem assets. Note that Symbiosis Capital, does not hold your funds. Rather, the capital is held on trust in some of the most reputable Australian banks under your name by your broker.
Further, we do not subject our MDA investors to long term lock-in contracts. You are free to add into or withdraw your capital. Deposits are instantaneous while your broker processes withdrawals often within 24 hours.
Can be highly diversified:
A managed discretionary account creates room for diversification. It can be created by pooling in a wide range of products. Finding the right investment account manager, in such a case, goes a long way in boosting your profitability. They are able to leverage product diversification in increasing strong returns.
This is best achieved if they invest in low-correlated or uncorrelated but highly rewarding financial instruments. Most investment account managers will also tell you that portfolio diversification is a risk management tool.
Note, however, that there is no standard approach to managing an MDA. Different investment managers will, therefore, adopt different approaches to trading and product diversification. The correlation levels of their portfolios will be quite dissimilar as they prefer to trade different instruments using different strategies.
Retain beneficial ownership of assets:
Some MDAs will let you retain the beneficial ownership of assets. You get to own the underlying assets for all the securities your investment manager buys. For instance, your investment manager will, at one time invest in shares, bonds, and other dividend or interest-earning securities.
Should the companies behind these instruments pay dividends or interest, you get to keep the earnings. At symbiosis Capital, however, we major in derivative investment that does not allow you to own underlying assets.
You can adjust the investment strategy
At Symbiosis Capital, we welcome calls to adjust risk levels. You may have chosen to start with a low-risk and low-return investment strategy. Once satisfied with its performance, contact your Symbiosis Capital investment manager and pick a higher risk-return level.
A managed discretionary account presents the investor with highly unique benefits. For instance, you do not need to be a highly experienced investor to open an MDA account. As an investor, you only need to decide on your risk tolerance level. A professional investment manager will manage the MDA on your behalf. Other unique benefits of operating an MDA include the fact that MDAs are quick to set up and highly liquid. You can add onto it at any time and withdraw within 24 hours.