Investment management agreements (IMAs) are a crucial component of any successful investment portfolio. These agreements outline the terms and conditions under which a client`s assets will be managed by an investment advisor or manager. However, there is another important document that often accompanies an IMA known as an investment management agreement side letter.
What is an Investment Management Agreement Side Letter?
An investment management agreement side letter is a supplemental agreement that is attached to an IMA. It contains additional terms and conditions that are specific to the client and the investment manager. These terms are negotiated between the two parties and are not included in the standard IMA.
The purpose of an investment management agreement side letter is to provide additional flexibility to the investment manager to better serve the needs of the client. It ensures that the investment manager can provide customized services to the client without compromising the standard terms and conditions outlined in the IMA.
Why is an Investment Management Agreement Side Letter Important?
An investment management agreement side letter is important for several reasons. First, it allows the investment manager to provide additional services to the client that are not covered by the standard IMA. For example, the side letter may allow the investment manager to use alternative investment strategies that are not covered by the IMA.
Second, it provides additional protection for the client. The side letter can include provisions that protect the client`s interests, such as restrictions on the investment manager`s ability to make certain types of investments or to charge additional fees.
Finally, the investment management agreement side letter can be used to clarify any misunderstandings or ambiguities that may exist in the IMA. By outlining specific terms and conditions that are unique to the client, the side letter can help prevent any confusion or disputes that may arise during the course of the relationship.
Conclusion
An investment management agreement side letter is an important document that should not be overlooked. It provides additional flexibility to the investment manager to better serve the needs of the client, while also protecting the client`s interests. If you are considering hiring an investment manager, be sure to discuss the possibility of a side letter with them and ensure that any additional terms and conditions are appropriately documented.