IEIM400820 - Investment Entity: Trusts Managed by a Financial Institution
Trusts Managed by a Financial Institution
A trust is typically regarded as being managed by a Financial Institution where either one or more of the trustees is a Financial Institution [see IEIM400600] or the trustees have appointed a Financial Institution, such as a discretionary fund manager, to manage the trust’s assets or to manage the trust.
Does a Financial Institution Manage the Trust?
A Financial Institution will manage the trust where it has been appointed by the trustees to carry out the day to day functions of the trust on behalf of the trustees. This goes beyond managing the investment of the trust’s assets and includes other management functions that the trustees have to perform but which are contracted to the Financial Institution.
Does a Financial Institution Manage the Financial Assets of the Trust?
A Financial Institution manages the financial assets of the trust where it has discretion to manage the investments or investment strategy for the assets. This will usually be where the trust has appointed a discretionary fund manager to manage their portfolio or a part thereof. The appointment of a discretionary fund manager will be evidenced by an agreement between the parties that provides for discretionary management.
Where the trustees of a trust invest in retail investments and the trustees make the decision on what investments to make, the arrangement will not amount to discretionary management. The Glossary of Definitions in the Financial Services Handbook defines both retail investment and retail investment activity.