Specialised Management: What it is, advantages, risks, and vehicles
At a glance:
• Specialised management, also known as active or discretionary management, involves a professional team selecting and managing the financial assets in a portfolio.
• The aim is to achieve a return that exceeds the benchmark index, in line with each client’s risk profile. However, there is no guarantee that this will be achieved.
• As it involves management costs and the risk of capital loss, it should be weighed up against each investor’s objectives and time horizon.
Specialised Management gives the portfolio manager greater freedom to select investment solutions that best suit the risk profile and objectives of each client. The aim is to achieve a higher return than the respective benchmark index, but it is important to emphasise that this is not always achieved. Available studies show that, over long periods, a significant proportion of active managers do not outperform the index consistently.
But is this vehicle suitable for all investors? Read on to find out what the concept means, what its benefits and risks are, and how to implement it.
What is Specialised Management?
Specialised Management involves investments made by a specialist team who are free to select the assets that will make up an investment strategy’s portfolio, whether through discretionary management or via investment funds. The aim is to seek a return higher than the benchmark, though this is not guaranteed. Thus, the specialists conduct an independent assessment of each investment and actively select the most attractive assets in order to outperform the market.
This is an especially challenging approach, since the performance of the portfolio is directly related to the investment decisions made by the specialist team. In order to find the best investment opportunities, it requires close monitoring of market changes and political, social and economic trends, as well as continuous dedication.
At Banco Carregosa, our Investment Department provides specialised management services based on our own unique model. Since 1833, we have been managing the assets of our clients, who have placed their trust in us across generations. To learn more, click here.
Specialised (Active) Management vs. Passive Management
The Specialised (Active) Management Strategy differs from Passive Management, which aims to reproduce and maintain the benchmark, without aiming to outperform it. Specialised Management is aimed at investors who wish to put all or part of their investments in the hands of dedicated and experienced asset management teams, either due to a lack of time or knowledge, or as part of an investment diversification strategy.
The two approaches are not mutually exclusive. It is common to combine them within the same portfolio, for instance by using low-cost passive instruments to gain structural exposure to the main markets, while employing active management for asset classes or themes where selection can add value. From this perspective, the important question is not whether the approach is active or passive, but how to allocate the appropriate weighting to each, and at what total cost and over what time horizon.
| Criterion | Specialised (Active) Management | Passive Management |
|---|---|---|
| Objective | Seeking to outperform a benchmark | Replicating the performance of an index |
| Investment decision | Active selection of assets by a specialist team | Automatic tracking of the index’s composition |
| Role of the specialists | Active and continuous | Minimum |
| Costs | Higher costs (management fee and, in some cases, performance fee) | Generally lower costs |
| Potential vs. index | It may outperform or underperform the index. Long-term evidence shows that achieving consistent outperformance is challenging | Tracks the index (lower costs) |
| Flexibility | Adjusts the portfolio to market conditions | Reduced flexibility |
| Suitable for those who… | want to delegate management and prefer a dynamic approach | prefer simplicity and low costs |
What are the advantages and risks of Specialised Management?
Advantages
• Time savings: investors can delegate their strategy, as well as their buying and selling decisions, to a dedicated team.
• Diversification: having the freedom to select assets enables risk to be spread across different investments, resulting in more efficient returns per unit of risk.
• Dynamic risk management: exposure is adjusted in line with market conditions to ensure it remains consistently aligned with the investor profile.
• Access to specialists: investors gain access to dedicated teams and tools for market analysis and monitoring, which they would find difficult to obtain independently. However, this does not guarantee better results.
Disadvantages and Risks
• Costs: management fees, and performance fees in some cases, reduce net returns. This is why an asset management strategy should always be considered from a medium- to long-term perspective.
• Failure to outperform the benchmark: active management does not always outperform the market in terms of returns.
• Capital loss: performance depends on volatile economic, political and social factors. There is no guarantee of capital preservation or returns, and investors may receive less than they invested.
• Risk of decision-making: returns depend on the choices made by the management team, which may turn out to be incorrect – the deviation from the benchmark may be positive or negative.
• Less control: with a discretionary mandate, investors do not intervene in every buying or selling decision, even though they define the portfolio’s profile and restrictions in advance.
• Time horizon and liquidity: some investment vehicles have their own subscription and redemption conditions, which means that the capital invested may not be available immediately.
• Taxation: the tax implications of portfolio turnover and the nature of each investment vehicle affect the actual return received.
Specialised Management: what are the instruments available?
At Banco Carregosa, we recognise that every client is unique, and our investment approach is tailored to their specific objectives and risk profile. To find the right portfolio for you, you can contact the specialised asset management service.
The portfolio is managed to achieve the proposed appreciation objectives, and its performance is continuously monitored in relation to the market. The specialists are responsible for creating and updating the portfolio, combining assets in such a way that they collectively achieve the defined objectives. This task requires a high level of specialisation, dedication and experience.
Recommended reading
Would you like to find out how Asset Management works in detail at Banco Carregosa, including Unit-Linked solutions and Management Mandates (discretionary)? Read the article "Asset management: what it is and how it works”.
In addition, or as a complement to, Asset Management, we also offer investment funds, which are available to clients and managers of Banco Carregosa as one of the investment vehicles. These financial products can include shares, bonds, commodities, alternative investments, and even real estate. They provide access to a diversified portfolio and optimise risk by allocating more or less capital to each asset. Investors become holders of units, the value of which is calculated and published periodically, typically on a daily basis. Before subscribing, you should consult the Key Information Document and the Investment Policy for each fund. These documents set out the risks, recommended investment horizon and applicable costs.
Overview Table
| Instrument | What it is | Typically sought after by … |
|---|---|---|
| Asset Management | A team manages the portfolio in line with the client’s objectives and risk profile. | … those who want to leave management entirely in the hands of professionals. |
| Investment Funds | Diversified portfolios (shares, bonds, commodities, alternative investments, property); the investor holds investment units. | … those looking to diversify through a single investment. |
Discover Banco Carregosa’s Specialised Management solutions
Market conditions are constantly changing, so it is essential to pay close attention to all the relevant variables. No management approach, whether active or passive, can eliminate the risk of making unfavourable decisions or losing capital.
The Banco Carregosa team can help you understand the available options, taking into account your investor profile and your objectives.
About Banco Carregosa
Banco Carregosa is the oldest financial institution still in operation on the Iberian Peninsula. Originally a foreign exchange bureau founded in Porto in 1833, it now operates as a bank specialising in Private Banking and Wealth Management. The Bank is supervised by both Banco de Portugal (registration no. 0235) and CMVM (registration no. 0169). For the second consecutive year, Euromoney has recognised it as the "Best Pure-Play / Boutique Private Bank” in Portugal. This accolade is awarded by an independent third party and is not dependent on the performance of any investment solution.
If you have any questions about this topic, contact our team. The first step before making any investment decision should always be to assess the investor’s profile, knowledge and objectives.
Specialised Management: Frequently Asked Questions
Does specialised management guarantee better returns?
No. The aim is to seek a return above the benchmark index, in line with the client's risk profile, but there is no guarantee of achieving it — active management may outperform or underperform the market.
What is the difference between specialised management and asset management?
They are the same concept seen from different angles: specialised management describes the approach (active, dynamic selection of assets), while Asset Management is the service through which Banco Carregosa delivers it, with solutions such as Unit-Linked products and Management Mandates.
Is specialised management the same as discretionary management?
Not always. Discretionary management is a form of specialised management in which the client fully delegates decisions to the manager, within an agreed policy. Specialised management may also include investment advisory services, in which the client retains the final decision.
From what amount can I gain access?
It depends on the solution and the framework (Savings and Investment or Private Banking). The minimum amount and the conditions of each solution are presented by your account manager or private banker.
Is specialised management right for me?
It is suited to those who prefer to delegate the management of their investments to a specialist team — whether for lack of time, lack of knowledge or as a diversification choice. Suitability always depends on your risk profile, objectives and time horizon, which should be assessed before entering into any agreement.
Legal Disclaimer: This article has been prepared by Banco Carregosa for information and educational purposes only. Under no circumstances does it constitute an investment proposal, recommendation to purchase, or personalised financial advice. Investing in financial instruments carries risks, including the possibility of losing your initial investment. Past performance is not a guarantee of future results. This information is general in nature and does not consider the financial situation, knowledge, experience or objectives of any specific investor. Any references to financial services or instruments are provided purely for illustrative purposes only and do not constitute an offer, invitation or recommendation to invest in them. Before making any investment decisions, you should consult the applicable pre-contractual and disclosure documentation for each instrument. If necessary, you should also seek advice from a qualified professional to help you assess whether the decision is appropriate for your risk profile and objectives.