Sunday 05, March 2017 by Nabilah Annuar

Utilisation of discretionary fund managers in the region are on the rise, says research

Quilter Cheviot says investors who have been affected by recent volatility are increasingly interested in the specialist skills offered by discretionary fund managers (DFMs). The regional trend follows a similar rise in other mature markets across the world.

Financial advisers in the Middle East are increasingly calling in the specialist kickers to convert their clients’ opportunities into increased returns, according to leading investment management firm, Quilter Cheviot.

A DFM (also known as discretionary investment managers), is an investment expert who actively manages investment portfolios on behalf of clients, making investment decisions on the client’s behalf. They work together in partnership with financial advisers, enabling advisers to focus on the financial planning aspects while the DFM focuses on managing the investments.

DFMs are growing in popularity around the world and the latest research reveals it’s a trend that is now being mirrored in the MENA (Middle East and North Africa) region.

Mark Leale, head of Quilter Cheviot’s Dubai representative office and principal representative, likens the service to the kicker in rugby or American football who is brought into the team for their specific skill.

“There are many analogies that can be used to explain what a DFM does, but with the recent Super Bowl and the Six Nations rugby tournament underway the specialist kicker seems a topical one to use. In both sports the kickers are in the team to convert the opportunities using their specific set of skills. When it comes to financial investments (and this analogy) DFMs are those kickers brought in by the coaches (the client’s financial advisers) to look after one of the most important aspects of financial planning—the investment management,”said Leale.  

He further explained that DFMs offer years of practical experience and access to primary and secondary research across all asset classes and access to leading industry and in-house research, helping them make the right investment decisions to benefit the client.

Using a DFM to provide bespoke portfolio management is growing in popularity across the world among financial advisers and their high net worth clients who require a tailored approach to their investments.

An October 2016 survey by adviser support services firm, Threesixty, suggested that around 80 per cent of UK advisers now outsource at least part of their investment work to a DFM, highlighting the increasing trend within the marketplace*.

This trend has also been reflected in the Gulf Cooperation Council (GCC) where the recent market volatility has had a significant impact on the individual investor’s attitudes resulting in more awareness of risk and an increased understanding of their investments.

The latest Middle East Investment Panorama (MEIP) report found that 71.3 per cent of advisers in the Middle East are now offering or considering to offer DFM services. Quilter Cheviot’s own regional research into investor attitudes found that the majority agreed that DFMs offered two key advantages—both of which will help provide comfort in volatile times.  

According to the report, 70 per cent of respondents agreed that a key benefit of employing a DFM was matching investment portfolios to their individual level of risk, while 63 per cent were attracted to the tight controls DFMs have in place to help protect against losses.

Other benefits outlined by the respondents included the ability to build a relationship with the investment manager (38 per cent), the assurance of a trusted and established brand and proven track record to deliver growth (36 per cent), the ability to create truly tailored portfolios which meet their investment requirements (36 per cent) and access to industry leading global investment research (33 per cent).

Mark added, “Many investors in the GCC are choosing to use the services of a DFM because they are failing to achieve desired outcomes from existing arrangements, some do not have enough time to manage investments themselves and many investors simply do not know where to start to look for the right investment. Investors are always encouraged to see a financial adviser before making any investment decisions. Financial advisers are experts in recommending the most suitable financial products, such as investment bonds, life assurance and pensions, but are not necessarily experts in managing an investment portfolio—this is where a discretionary investment manager’s knowledge, investment process and experience is essential.”

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