Investment Management Contract Template for the United States

An Investment Management Contract is a legally binding agreement that formalizes the relationship between you as a client and a professional investment manager who will oversee your assets. This contract grants the manager discretionary authority to make investment decisions on your behalf while establishing clear boundaries, objectives, and accountability measures under United States federal securities law.

When do you need this document?

You need an Investment Management Contract when hiring a professional investment advisor to manage your portfolio, pension fund, endowment, or other significant assets. This is essential for high-net-worth individuals seeking professional management, institutional investors like pension funds or foundations, family offices managing multi-generational wealth, and corporations establishing employee benefit plans. The contract is also required when transitioning from self-directed investing to professional management or when changing investment advisors.

Key legal considerations

The contract must clearly define the investment manager's fiduciary duty to act in your best interests at all times. Investment authority and guidelines should specify exactly what types of investments are permitted, risk tolerance levels, and any restrictions on asset classes or strategies. Fee structures must be transparent, including management fees, performance fees, and expense allocations. The agreement should establish detailed reporting requirements, including frequency and content of performance reports. Termination clauses must specify notice periods, asset transfer procedures, and final fee calculations. Liability and indemnification provisions protect both parties while ensuring the manager maintains appropriate professional liability insurance.

Legal requirements in United States

Investment Management Contracts must comply with the Investment Advisers Act of 1940, which requires investment advisors managing over $100 million to register with the SEC and smaller advisors to register with state regulators. The contract must include mandatory disclosures outlined in Form ADV Part 2, covering the advisor's business practices, fees, conflicts of interest, and disciplinary history. Under the Investment Company Act of 1940, contracts involving mutual funds or other investment companies require specific approval procedures and cannot exceed two years initially. ERISA compliance is mandatory when managing pension or retirement assets, imposing additional fiduciary standards and prohibited transaction rules. The Dodd-Frank Act requires additional oversight for managers of significant assets, including potential registration as systemically important financial institutions. State laws may impose additional requirements, particularly for smaller investment advisors who register at the state level rather than with the SEC.