How managed accounts work

A managed account is a proprietary segregated vehicle in which investors’ assets are pooled.  The Managed Accounts provider (e.g. the CASAM platform) acts as the Investment Manager of the fund and delegates its trading activity to an external Hedge Fund Manager who operates as the Sub-Investment Manager. The Sub-Investment Manager’s mandate is to replicate his strategy pari passu with his “benchmark” fund if any. In-depth due diligence and ongoing risk monitoring are performed by the Investment Manager to ensure the quality and reliability of the selected Sub-Investment Manager.

The Investment Manager maintains the lead on all risk control and valuation process. The Investment Manager has full transparency in the Hedge Fund Manager’s trading activity thanks to an ongoing dialogue with him and a continuous risk monitoring between the managed account’s and the benchmark fund’s positions and performance.

The Investment Manager has also a veto power in the selection of prime brokerage, clearing, OTC, repo and trading counterparties. He maintains the control over the Prime Broker, the Administrator and third-party service providers by negotiating his own agreements with each of them. The Prime Broker operates back office functions, provides financing and stock lending. The Administrator performs cash reconciliations and NAV calculation. Both the Prime Broker and the Administrator regularly reports to the Investment Manager.

For the end investor, a managed accounts platform means to catch the attractive performance of a Hedge Fund while offering more transparency in the underlying strategy, thorough risk monitoring of trading activity and valuation procedures, and better liquidity thanks to order aggregation and assets’ pooling. In addition, a managed accounts platform may also provide customization to better respond to specific investors’ requirements.

Benoit Testard from