An advised fund is an investment fund managed by an advisor who selects and manages the fund’s assets on behalf of investors, commonly used for customized wealth management solutions.
An advised fund refers to a type of investment fund wherein an external advisor is responsible for making investment decisions and managing the portfolio’s assets. Unlike standard mutual funds or ETFs that follow a predefined investment strategy, advised funds allow for more tailored asset selection and active management by the advisor. In the context of family offices or wealth management, this structure offers flexibility to align investments with specific goals, risk tolerances, or tax considerations. The advisor typically has discretion to buy, sell, and allocate assets within defined parameters, often providing a more personalized investment approach compared to passive funds.
Advised funds are significant because they enable sophisticated investors—such as family offices or high-net-worth individuals—to integrate professional expertise directly into portfolio management, enhancing decision-making quality and enabling strategies that may not be achievable through off-the-shelf investment products. This is particularly beneficial for tax planning and governance as the advisor can make timely asset disposition to optimize tax outcomes or rebalance according to evolving family objectives. Moreover, advised funds improve reporting clarity and investment tracking by centralizing advisory services within one fund structure, facilitating governance oversight and compliance.
Suppose a family office establishes an advised fund with $10 million and selects a wealth manager to oversee asset allocation and security selection. The advisor identifies undervalued equities and high-quality bonds tailored to the family’s income requirements and ESG preferences. Over the year, the advisor adjusts holdings based on market conditions and tax considerations, resulting in a 7% net return. This customized approach helps meet specific family objectives unlike a generic mutual fund.
Sub-Advised Fund
A sub-advised fund is an investment fund that hires a third-party investment advisor (a sub-advisor) to manage a portion or all of its assets, whereas an advised fund is directly managed by an advisor selected by the investor. The key difference lies in the management chain; a sub-advised fund typically involves delegation from a primary fund manager, while an advised fund provides direct advisor control over the portfolio.
What distinguishes an advised fund from a mutual fund?
An advised fund is actively managed by a dedicated advisor who customizes the investment portfolio according to the investor’s specific goals, whereas mutual funds follow a predefined investment strategy accessible to the general public without individual customization.
Can investors directly influence investment decisions in an advised fund?
Yes, investors typically define the parameters, objectives, and constraints for the advised fund, enabling the advisor to tailor the portfolio accordingly. However, day-to-day decisions are managed by the advisor within those agreed boundaries.
How does an advised fund impact tax planning?
Advised funds can actively manage tax-efficient strategies, such as tax-loss harvesting or managing capital gains distributions, by making timely investment decisions that align with investors’ tax profiles and goals.
