Question 1

What is an Asset Management Agreement

Accepted Answer

The Asset Management Agreement is a crucial document used when a client (individual or institution) wishes to engage a professional asset manager to manage their investment portfolio in Nigeria. It establishes the legal framework for the relationship, ensuring compliance with Nigerian regulatory requirements, particularly the Investment and Securities Act 2007 and SEC regulations. The agreement covers essential aspects such as investment strategy, risk parameters, fees, reporting requirements, and fiduciary responsibilities. It's particularly important in the Nigerian context due to specific local regulatory requirements and market conditions, while also considering potential international investment aspects. The document should be customized based on whether the client is an individual, corporation, or institutional investor, and whether the investment strategy includes local or international assets.

Question 2

What sections should be included in an Asset Management Agreement

Accepted Answer

1. Parties: Identification of the Asset Manager and the Client, including full legal names, registration details, and addresses. 2. Background: Context of the agreement, including the Asset Manager's qualifications and the Client's intention to appoint them. 3. Definitions: Detailed definitions of key terms used throughout the agreement. 4. Appointment and Authority: Formal appointment of the Asset Manager and scope of their authority. 5. Investment Objectives and Strategy: Agreed investment objectives, risk profile, and investment strategy. 6. Services and Responsibilities: Detailed description of services to be provided by the Asset Manager. 7. Client's Responsibilities: Obligations of the Client including providing accurate information and timely responses. 8. Fees and Expenses: Comprehensive fee structure, payment terms, and eligible expenses. 9. Reporting and Valuations: Frequency and content of reports, valuation methodology. 10. Risk Disclosures: Detailed disclosure of investment risks and market uncertainties. 11. Conflicts of Interest: Disclosure and management of potential conflicts. 12. Confidentiality: Protection and handling of confidential information. 13. Term and Termination: Duration of agreement and termination provisions. 14. Liability and Indemnification: Extent of Asset Manager's liability and mutual indemnification provisions. 15. Governing Law and Jurisdiction: Nigerian law as governing law and jurisdiction for disputes. 16. Miscellaneous: Standard boilerplate provisions including notices, amendments, and severability.

Question 3

What sections are optional to include in an Asset Management Agreement

Accepted Answer

1. Custody Arrangements: Required when assets are held by a third-party custodian, detailing custody arrangements and responsibilities. 2. Foreign Investment Provisions: Required when portfolio includes foreign investments, addressing foreign exchange and international trading requirements. 3. Shariah Compliance: Required for Islamic investment management, specifying Shariah-compliant investment restrictions and requirements. 4. Joint Account Provisions: Required when the Client consists of multiple parties, detailing joint decision-making and liability. 5. Performance Fees: Optional section for performance-based fee structures, including calculation methodology. 6. ESG Investment Criteria: Required when Client requires specific environmental, social, and governance investment criteria. 7. Delegation: Required when Asset Manager may delegate certain functions to third parties.

Question 4

What schedules should be included in an Asset Management Agreement

Accepted Answer

1. Investment Guidelines: Detailed investment parameters, restrictions, and guidelines. 2. Fee Schedule: Detailed breakdown of all fees, charges, and calculation methodologies. 3. Authorized Persons: List of persons authorized to give instructions on behalf of the Client. 4. Reporting Format: Templates and formats for regular reporting. 5. Initial Portfolio: Details of assets initially transferred to management. 6. Risk Disclosure Statement: Comprehensive risk disclosures as required by Nigerian SEC. 7. KYC Documentation: Required Know Your Customer and due diligence documentation.

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