Where are the traps in managed account agreements? by ProQuest


Commodity trading advisors (CTA) are asked to sign variety of contracts on a regular basis: technology agreements, office leases, licensing contracts and third party marketing agreements, just to name a few. However, arguably the most important contracts for CTAs are the managed account agreements, sometimes called "advisory agreements," with their clients. The fee section of an advisory agreement may say 2 and 20 (the relatively standard 2% management fee and 20% incentive fee structure), but it is rarely that simple and there are opportunities to maximize the CTA's fees and to avoid some unpleasant surprises by paying attention to the details. Often, the longest and most tedious section of an advisory agreement is the indemnification section. Although challenging to read, it is the most important section to get right. Most advisory agreements provide for arbitration in the event of any dispute between the client and the CTA.

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