Process of Acquiring Institutional Investor

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Usually institutional clients will not investment money with a new and unknown investment firm. Institutional clients will monitor the investment firm’s track record for at least three years. It is the responsibility of the marketer of the investment firm to maintain relationship with a prospective institutional client and furnish investment performance report to the prospective client for review. The marketer also needs to present to the prospective client their investment philosophy and investment process. 

After three years of monitoring, if the institutional investor wants to invest with an investment firm, the client will contact the investment firm to request for investment proposal. After reviewing the investment proposal, the prospective client would proceed further into the next phase. 

During the second phase, the prospective client would study the investment process in more detail and scrutinize the investment performance report. Initial negotiation of fees and investment requirement will start in this phase. If the institutional client is satisfy with the preliminary finding and both parties agreed to the investment requirement and fees, both parties would proceed to the next phase. 

In the third phase, the prospective institutional investor and the investment firm will start negotiating and formulate an Investment Management Agreement. At the same time the institutional investor will perform their due diligence and examine the investment firm’s internal audit & control, compliance procedure, security measure and investment operation. The prospective investor will detail their investment restriction and operational requirement to the investment firm’s operational staff. Once the institutional investor is satisfied with the investment operation, it will proceed to finalize the Investment Management Agreement (IMA) with the management. 

Once the IMA is signed, the investment firm has secured the investment fund from the institutional investor.  The investment firm will receive money or securities from the investor at the stipulated date and invest the money according to guidelines lay out in the IMA.

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