A Discretionary Fund Manager or ‘DFM’ exercises their professional discretion to buy and sell investments on your behalf.
A discretionary management service can deliver highly tailored investment portfolios based upon your individual circumstances and objectives.
This is in contrast, to an advisory mandate in which you, as the client, are asked to approve recommendations in advance.
Discretionary Fund Managers argue that their autonomy enables them to:
✔ Rapidly react to market conditions
✔ Outperform benchmarks
✔ Provide highly bespoke solution
✔ Demonstrate individual expertise in stock picking
✔ Re-balance whenever required
Discretionary Fund Management is viewed as a traditional way of managing investments, generally with an individual investment manager or committee responsible for investment decisions. A Discretionary Fund Manager often holds individual securities likes stocks and bonds but also funds and derivatives.
A Discretionary Fund Manager normally offers greater visibility of what the underlying investments are. For example, there might be 30 different stocks, and 10 different bonds in the portfolio, and any report produced will tell you about the performance of all of them. With a fund or ETF portfolio, you will get less information about the underlying investments instruments.