Individual management mandate

In contrast to collective management, an individual (or discretionary) management mandate enables investors with sufficient funds to obtain customised management of their assets. Under this arrangement, the investor gives the manager a power of attorney to manage his or investment portfolio. However, the services offered must still be appropriate for the investor’s circumstances.

Mandates can be offered by a portfolio management company as its main business, or as a sideline by other investment services providers (ISPs), as in the case of “private asset management” services offered by banks. Such providers must first submit their programme of operations to the securities regulator for its approval.

Individual management mandates

A discretionary management mandate is a contract governed by civil law drawn up between the manager (the agent) and the investor (the principal) and signed in a face-to-face meeting with retail investors, or after a request for proposals in the case of institutional investors.

Under the terms of the mandate, or discretionary management contract, the manager takes any initiatives that it sees fit to manage the investor’s portfolio for best results. Transactions are carried out without the investor’s prior consent and reported to him or her after the fact.

The management mandate is a contract, yet some clauses are obligatory in France, where management mandates must stipulate:

• The investors’ status
• The investment universe and management objectives
• Benchmarks
• The compensation procedure for the management company
• The eligible financial instruments
• Specific authorisation to trade in derivative markets, where appropriate
• Reporting procedures (the contract must stipulate quarterly reports at the minimum, and monthly reports when derivatives are used) and performance measurement procedures.