A managed discretionary account (MDA) agreement is a legal document that outlines the terms and conditions between an investor and a fund manager. This agreement allows the investor to give the fund manager the discretion to make investment decisions on their behalf.
In simple terms, an MDA agreement gives investors the opportunity to outsource investment management to a professional fund manager. The fund manager typically has the expertise, resources, and tools needed to make informed investment decisions that align with the investor`s goals and objectives.
MDA agreements can be incredibly helpful for investors who have a complex investment portfolio or lack the time and expertise to actively manage their investments. Additionally, an MDA agreement can help investors reduce risk and increase diversification by spreading investments across different sectors, asset classes, and geographies.
Before signing an MDA agreement, it is important for investors to understand the terms and conditions outlined in the agreement. This includes the fees associated with managing the account, how investment decisions will be made, and the fund manager`s investment philosophy.
Investors should also be aware of the risks associated with MDA agreements, which include potential losses from market volatility, conflicts of interest, and the possibility of underperformance. To mitigate these risks, investors should carefully assess the capabilities and track record of the fund manager, as well as the investment strategies outlined in the MDA agreement.
In conclusion, an MDA agreement can be a valuable tool for investors looking to outsource investment management. However, it is essential to understand the terms and conditions outlined in the agreement and to assess the risks associated with outsourcing investment decisions. With proper due diligence and careful consideration of the benefits and risks, investors can make informed decisions about whether an MDA agreement is right for them.