Appointment of sub-adviser: Overview, definition, and example
What is the appointment of a sub-adviser?
The appointment of a sub-adviser refers to the process by which a primary adviser (usually an investment manager or consultant) designates a secondary adviser (the sub-adviser) to handle specific aspects of their duties, typically in relation to managing a client’s investments or providing specialized expertise. A sub-adviser works under the direction and supervision of the primary adviser and is responsible for specific tasks such as managing particular investments, portfolios, or areas of expertise that the primary adviser is not fully equipped to manage themselves.
In simpler terms, the appointment of a sub-adviser means hiring an expert or specialist to assist with specific tasks under the supervision of the main adviser.
Why is the appointment of a sub-adviser important?
The appointment of a sub-adviser is important because it allows businesses, particularly in fields like finance or law, to access specialized expertise that enhances the quality and effectiveness of the services being provided. For example, a primary investment adviser may hire a sub-adviser who specializes in a particular asset class or region to ensure that clients receive the best management for their specific needs.
In many cases, the primary adviser may not have the resources or knowledge to cover every area needed for a comprehensive service, so appointing a sub-adviser enables the delivery of more specialized, expert advice and management.
Understanding the appointment of a sub-adviser through an example
Imagine a financial advisory firm managing a large investment fund. The firm may specialize in global equity investments, but lacks expertise in managing fixed-income securities. To address this gap, the firm appoints a sub-adviser who specializes in bond investments to manage that portion of the fund. The sub-adviser operates under the terms set by the primary adviser but is responsible for the day-to-day management of the fixed-income portfolio.
In another example, a law firm with a focus on corporate law may appoint a sub-adviser who specializes in intellectual property law to handle the IP-related aspects of a client’s portfolio. This allows the law firm to offer broader services without needing to have all areas of expertise in-house.
Example of an appointment of sub-adviser clause
Here’s how an appointment of sub-adviser clause might appear in an agreement:
"The Adviser may appoint one or more Sub-Advisers to perform specific investment management services under the terms of this Agreement. The Sub-Adviser(s) shall provide their expertise and services as directed by the Adviser, and the Adviser will remain responsible for the overall management of the portfolio. The Adviser agrees to ensure that the Sub-Adviser(s) comply with the terms and conditions set forth in this Agreement and any applicable laws and regulations."
Conclusion
The appointment of a sub-adviser allows businesses and individuals to enhance the quality and scope of the services they provide by leveraging specialized expertise. This arrangement ensures that clients receive the best possible advice and management in areas where the primary adviser may not have the required experience or knowledge.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.