Discretionary Fund Management (DFM)

Discretionary Fund Management (DFM)

A Discretionary Fund Manager is an investment specialist, traditionally a stock broker or wealth manager, who is employed by a client in conjunction with their Independent Financial Adviser to run the investment portfolio on a day to day basis on their behalf.

Discretionary fund management offers a number of benefits to clients. It frees them from the burden of making day-to-day investment decisions, which can arguably be better made by a qualified portfolio manager who is attuned to the variances of the market.

Delegating the investing process to a competent manager leaves the client free to focus on other things that matter to him or her.

The purpose of a discretionary fund manager is to take into account the amount invested and diversify this across investments geared to make you a return on the investment.

Expat Financial Advice Online work with leading discretionary fund management that are tailored to each individual and institutional investors. Pension funds, lump sum saving and investments can be invested into a range of module portfolios that each have their own discretionary fund manager.

The fund manager's strategy may involve purchasing a variety of securities in the market, as long as it falls in line with his or her client's risk profile and financial goals.

What can they invest into?

A lot of what they invest in will vary and will be determined on your risk profile, age, how long you wish to hold certain investments, when you look to take a capital from the investments and so on.

All these factors play a big part in building the correct portfolio for an investment.

Typical investments a discretionary fund manager uses within their portfolio are stocks, bonds, ETF’s and other financial instruments.


Bonds, purchased by banks, insurance companies, fund managers and pension funds are debt securities that are traded publicly. They offer a fixed term return on a set date with a promise to pay in full the investment initially purchased.

Bond are used to reduce risk as unlike stocks and shares that fluctuate, bonds are a promise to pay back the capital invested.

Bond Allocation

· UK Corporate Fixed Interest 71.88%

· French Corporate Fixed Interest 6.26%

· Cash & Cash Equivalents 5.98%

· Dutch Corporate Fixed Interest 3.57%

· Global Corporate Fixed Interest 3.54%

· German Corporate Fixed Interest 1.99%

· Canadian Corporate Fixed Interest 1.70%

· US Corporate Fixed Interest 1.66%

· South African Corporate Fixed Interest 0.95%

· Others 2.47%

Stocks and shares

As with most funds under management and having full diversity, discretionary fund managers will ensure that part of their portfolio will include shares as well as stocks. These will be traded on a daily basis but they do carry a risk associated with them.

As the stock market is faced based and will change daily and hourly, the risk will spread over the capital share invested in to the stocks and share market. This could mean that they carry 20% of your initial investment in to stocks and shares however, this is further diversified into high risk shares 30% balanced 20% and low risk 50%.

All discretionary fund managers will have their own determined investments in to stocks and shares. Again this will have been brought forward based on a risk profile for yourself and the portfolio should intern meet your risk.

Stocks and Shares Allocation

· UK Equities 45.98%

· US Equities 15.73%

· Japanese Equities 11.42%

· Chinese Equities 4.49%

· French Equities 2.72%

· Swiss Equities 2.41%

· German Equities 2.18%

· Taiwanese Equities 2.01%

· Indian Equities 1.18%

· Others 11.88%


As with shares, ETF’s or exchange traded funds carry a high volatility. They are stocks exchanged on the stock market and are usually linked to an index.

Typical index with the ETF will be the S and P 500. The advantages of an ETF are that they are, low cost, can be very well diversified within a portfolio and trade live daily.

With diversification in mind, the discretionary fund manager will allocate a portion of the funds invested in to ETF’s. By doing so they reduce the risk of having all your eggs in one basket and there for form the correct correlation within the portfolio.

How can this assist yourself?

By working with Expat Financial Advice Online and our discretionary fund managers, your risk is gratefully reduced as an individual risk assessment is completed on an individual basis. Each client is different, the risk assessment can prove vital to ensure that your funds work to your behaviour and understanding.

Portfolios can then be discussed on your profile basis and, each discretionary fund manager works alongside this when selecting the funds within the portfolio.

This can be within a pension, Savings and Investments.


As you would expect, using a discretionary fund manager and a module portfolio, it can carry a fund entry fee and an on-going management charge. There are many variations in the charges but we can assume that as an on-going management charge it will range from 0% to 1.5% per annum.

The entry fee of a discretionary fund manager and a module portfolio can vary from pensions, bonds and direct investments. Typically, 0% to 1% on pension and direct investments. Bonds have a further variant as many funds have an entry fee up to 5% and the annual management charge is reduced over a 5-year period.

Next steps

Do you hold a pension, bond, savings, Investment or are you looking for an investment structure that can have your hard earned capital working harder? Contact Expat Financial Advice Online and discuss how discretionary fund management can benefit yourself.

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