MDA investment has become increasingly popular in Australia in recent years. As a form of managed investment, MDA allows investors to delegate investment decisions to professional managers. In this article, we will look at what is MDA investment, how MDA managers operate, the benefits and risks of using MDA services, and tips for selecting quality MDA managers in Australia.
MDA investment delegates powers to managers
MDA (short for ‘Managed Discretionary Account’) is a form of managed investment where investors appoint MDA managers and delegate decision-making powers to them. MDA managers have discretion to make investment decisions and transact on behalf of investors based on an agreed investment program, without consulting them for each transaction. This contrasts with advisory services where investors make the final investment decisions.
MDA managers must be licensed by ASIC
In Australia, MDA managers must hold an Australian Financial Services License (AFSL) issued by ASIC. The MDA service must be explicitly included in the licensee’s authorized services. Licensed MDA managers have fiduciary duties and must act in investors’ best interests. They must ensure the investment program aligns with clients’ objectives, risk appetite and desired returns.
MDA managers follow structured processes
Quality MDA managers have structured and robust investment processes. It typically includes researching and selecting a portfolio of assets, monitoring and adjusting positions, and managing risks. MDA managers may invest across different asset classes like stocks, bonds, property, etc. Their decisions aim to optimize risk-adjusted returns for investors.
MDA offers customization and active management
A key benefit of MDA is the customization for each investor. MDA managers assess individual needs and tailor investment programs accordingly. MDA also provides access to active management and expertise which individual investors may lack. However, investors give up control over investment decisions and pay higher fees compared to direct investing.
Tips for choosing an MDA manager
When selecting an MDA provider, consider their experience, performance track record, transparency, fees charged and customer service. Reading disclosure documents carefully is essential to understand how the MDA operates. Comparing multiple providers is recommended. A quality MDA manager can help investors reach their goals via personalized expert management.
MDA investment is gaining popularity among Australian investors who want customized portfolios actively managed by professionals. While delegating decision-making powers, investors should ensure MDA managers have proper licensing, experience and processes. Choosing the right MDA provider is crucial to benefit from their expertise.