What Is Discretionary Portfolio Management?

Financial Training

Discretionary portfolio management is a form of investment management in which decisions to buy and sell assets are made by a professional, usually a manager, on behalf of the client. Therefore, the term refers to the real possibility of delegating the management of an asset portfolio in the hands of experts. They will decide what to buy and sell at all times so that the client achieves the highest possible return within their risk profile.

When contracting a delegated management product or service, the client signs a contract in which it is specified that investment decision-making will always be in charge of the manager, who will decide, depending on market conditions, in what to invest or diverts at every moment.

Discretionary portfolio management is a form of investment management in which a professional makes decisions to buy and sell assets.

Before signing the contract, the financial advisor analyzes the client to determine his level of risk aversion, his short-term liquidity needs, and his profitability expectations. Given all this, the advisor or manager in question will determine what type of portfolio is the most convenient for the client.

As usual, discretionary portfolio management is used through investment funds. Clients have access to a vast universe of assets in which, in many cases, they could not invest individually and directly, nor with the reduced costs that professional managers do. In other words, in a delegated management or discretionary management contract, the client’s portfolio is usually invested in a basket made up of several investment funds.

Delegated portfolio management also includes the investment monitoring and tracking service, which implies that the manager selects the assets in which he invests based on his vision of the markets at all times, always seeking to collect his best investment ideas.

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