Viewing entries tagged with 'SMA'
In addition to our existing facilities, we are now providing a managed account service, with a new fee structure which reflects performance on the account, aligning our interests with yours, and reducing the transaction costs. Basically, if you don’t profit from our advice – neither do we.
A separately managed account (SMA) allows BBY New Zealand (BBY), through a specifically designated manager, to manage a client’s trading account and use its discretion to make and execute trading decisions on behalf of the client without specific approval each time.
It means that you can invest in these niche markets, without having to commit the personal time and attention required to trade these markets yourself.
How it works is that, in consultation with us, you select your preferred manager, trading strategy and risk profile. We then,
- manage the account for you according to that criteria,
- make and execute the trading decisions, and
- report to you regularly on the state and performance of the account.
Why invest in derivatives, and why via a managed account?
A viable alternative to traditional investments (e.g. property, term deposit), derivatives such as futures contracts and margin-FX products offer potential for enhanced returns in a variety of market conditions, and provide substantial diversification of your investment portfolio.
Investing in these markets via an SMA, using the expertise of a professional trading advisor (manager), gives investors exposure to these complex markets without having to dedicate years of time and training to get to a point where the trading can be properly managed and structured. Having an advisor managing your account also adds some objectivity and discipline to the process which gets lost when a client is trading their own account directly.
Trading Strategy and Analysis
A preferred trading strategy and limitations are agreed with the client when the SMA is established, and referenced in the Client Authority.
Trading strategies will reflect a mixed analysis of economic fundamentals and technical indicators, depending on your nominated manager, and the trading instructions chosen by the client.
Trading will be focused on foreign exchange and futures products – giving clients exposure to these more speculative trading markets - high reward/high risk. The goal is to make sure the risk is managed properly, and that the potential rewards properly reflect the risks involved.
The result is an individually held, managed risk/reward orientated account that complements a client’s more traditional portfolio, and provides significant diversification and hedging opportunities.
The products in which the account will operate will tend to be non-correlated to traditional asset classes and therefore have the ability to generate profits when traditional assets such as shares and property are producing negative returns. The instruments that can be included for selection in the account are predominantly from the following market sectors;
- Foreign Exchange
- Share Market Indices
The account will strive to deliver positive returns under all market conditions, including falling markets, and aims to achieve net returns in excess of 20 % p.a., which reflects the risk being taken with this style of investment. Clients should note however that, as with all types of investing, there are no guarantees or promises that a specific return can or will be made.
There are inherent risks in investing in derivative products. They are complex, the markets can be volatile and speculative, and because of the leverage involved investors are exposed for more than their initial deposit.
Leverage is a significant factor in managing risk, as is the proper use of stop losses and position sizing. The more leverage, the more of a gamble the trade becomes, and the less relevance fundamental analysis has on the result. It’s a delicate line between utilising sufficient leverage to benefit from trading opportunities, and over-leveraging which means the market dictates your trading decisions and emotions – not you.
In order to manage this exposure and to derive proper benefit from the leverage opportunities available we have established specific rules around risk management and position sizing, including set margin limits and stop losses. Counterparty risk is reduced by ensuring that all counterparties are licensed and regulated by ASIC.
While we can mitigate risks to some extent by careful management, risk cannot of course be negated entirely. However, by applying these principles we can at least ensure that the risks are managed in a manner that is commensurate with the potential rewards.
An administrative fee of 2.0% p.a. is charged monthly to cover administrative costs, and a manager’s performance fee equal to 25% of profit over the life of the account, measured against a perpetual high water mark, is charged monthly. This means that the incentives and rewards of the manager are closely aligned with that of the client.
The Minimum Deposit required to open an SMA is NZ$20,000, with a minimum term of only one month. The SMA will be managed in NZ$ and all administration and management fees will be charged in NZ$.
Withdrawals and Deposits
To enable adjusting of positions, accurate calculations of management fees and performance fees, withdrawals and deposits need to be instructed within 5 business days of the last trading day of the month and will be made within 5 business days after the 1st trading day of the following month.
Reporting and Communications
The client will;
- Receive monthly notification by email of trading performance, account balance and fees;
- Receive Quarterly Reports and Annual Statements at the end of each financial period; and
- Be able to view their account online to monitor the investments on a 24/7 basis.
To open an account, click here.
Manager Trading Profiles
To read more about our managers and their trading profiles, click here.
BBY (NZ) Limited, a specialist advisor in Futures - FX - CFD - Options - Shares - Gold - Silver - Commodities - Managed Accounts - DIMS