Managed Discretionary Accounts

For more information on Managed Discretionary Accounts, contact your advisor or Murray Broun at mbroun@cklocke.com

Key Benefits

• No profit, no incentive fee
• Not dependant on rising share markets
• Trading and management out-sourced to professionals
• Broad spectrum investment diversification
• Account managed personally, not "pooled" with others
• Absolute personal access to your MDA manager
• Profit realisation flexibility
• Results publicly displayed on our website
• Regulated by ASIC.

Why trade using an MDA Service?
Many investors recognise the potential benefits of trading futures markets, however find themselves constrained by time or inclination to a degree whereby traditional non- discretionary trading may not be appropriate for the individual investor’s self -management.

A MDA is the process whereby the MDA Manager (The Operator) manages a portfolio of futures contracts and/or options on your behalf with the aim to profit from moves in the prices of financials, commodities and currencies. Discretionary and/or Managed Futures is a growing in worldwide popularity that offers potential benefits over other forms of investments.

An MDA service may be a viable alternative to traditional asset sectors, such as shares, property, fixed interest and cash, as trading via a MDA offers the potential for enhanced returns in a variety of market conditions and potentially substantial diversification of your investment portfolio.

The traditional investment portfolio of shares and property is dependent to a large extent on the growth of the economy whereas an MDA is traded independently of such external factors. A MDA investment provides direct access to the world’s major economic markets through a range of contracts covering stock indices, interest rates, currencies, energy, metals and agricultural commodities. Hence trading via an MDA is not necessarily dependent on rising stock markets and in many cases, profits can be realised when share markets are falling.

Whilst this MDA is subject to a higher levels of risk as compared with traditional investments, Managed Futures in general has provided return and risk levels that compare favourably with other forms of investment.

Despite MDA’s sharing similar features, MDA’s are not defined as  “Managed Funds” under Corporations Law and no representation whatsoever is made that this MDA is representative of a managed fund. Nor is there any implication that any MDA will experience the type of success mentioned in the above paragraph.

The main reason why an investor may use an MDA service is to seek profits via the Operator’s efforts in managing the investor’s portfolio. A MDA structure may also offer (depending on circumstances) taxation benefits because the client’s portfolio is managed as discretely belonging to the client.

For example, a client using an MDA service may be able to off-set capital losses arising from the sale of an asset held outside the MDA against positive returns from the MDA and visa versa. This may also allow flexibility for the client to time profit realisation. Profit realisation (if any) is distributed on a quarterly basis at the request of the client. Accordingly, the client may have more control over their income and tax liabilities as a whole while being able to outsource to the Operator the responsibility for making investment decisions on a day- to- day basis. This is because the Operator does not pool one client’s assets with the assets belonging to any other client for investment purposes.

MDA investors also receive individual reporting in terms of financial statements.

Background to MDAs

Investing via MDAs offers greater flexibility because The Operator makes investment decisions for and on behalf of the investor. The Operator  (depending on certain limitations) has the authority to carry out trades and switch positions in a timely and efficient manner in a discretionary capacity, as the Operator and the investor are bound by the MDA contract.Hence the day to day decision making and management of the investors portfolio becomes the duty of the Operator.

In consideration for potentially generating profits for the investor and managing the account, a percentage incentive fee applies to new net profits and is paid to the Operator. This usually ranges from 20 to 30 percent of new net profits. This means that the incentive fee will not apply to any trading period (eg month) in which a trading loss is sustained and such a loss will have to be recovered before the Incentive fee is again applied subject to the terms of this contract.

MDA Structure

Investments held in an MDA are not pooled with other investors’ funds, hence do not fall under the Managed Investment Scheme legislation pursuant to Chapter 5C of the Australian Corporations Act. Instead the individual investor’s account is separated in the form of a “Client Segregated Account”. Funds are held with the Clearing Broker and not with CK Locke and Partners. In this way, the client holds title to the funds who, in turn, contracts with the Operator to manage the funds via the MDA Contract.