Instructing an investment manager

By Tolley in association with Kevin Custis
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The following Trusts and Inheritance Tax guidance note by Tolley in association with Kevin Custis provides comprehensive and up to date tax information covering:

  • Instructing an investment manager
  • Reasons for using an investment manager
  • Choosing an investment manager
  • Terms of the agreement

Reasons for using an investment manager

Under the Trustee Act 2000 trustees are under a duty to seek advice from an appropriate person regarding the matter of investment. Trustees are also empowered under that act (and in most modern governing instruments) to delegate the function of holding investments to a suitable nominee. In the modern world of investment management, regulated investment managers are able to undertake both those functions with their standard discretionary or advisory services for trustees as they do for individuals. Unless the trustees deem that an investment policy to include diversification is not suitable to the particular circumstances of the trust then it is becoming more common for them to instruct a professional investment manager and delegate this function to them.

There are a number of reasons that could lead a trustee to conclude that it is not appropriate for a professional investment manager to be appointed and the most common are as follows:

  • timing and the need for liquidity

    If a trust fund is to be held for a short period of time before it is distributed or used to purchase a specific asset then most investment strategies that a professional investment manager would suggest would be too long term to be a reasonable path to follow.

  • existing assets have specific reasons to be retained

    The duty to make a trust fund productive for the beneficiaries by investing it will not override all other considerations. Houses and land where beneficiaries and their dependants occupy or companies where they work may confer a benefit over and above their potential to generate financial returns. Chattels may also fall into the category of conferring benefit that goes beyond that of an asset that is simply held as a financial investment. There may

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