subadvisor

A subadvisor is an investment management firm or individual that is hired by a primary investment advisor, often referred to as the "main advisor" or "fund manager," to manage a portion of an investment portfolio or a specific strategy within that portfolio. This arrangement is common in the mutual fund industry and other pooled investment vehicles. The main advisor retains overall responsibility for the fund's investment objectives and performance, but delegates the day-to-day management of certain assets or strategies to the subadvisor.

Subadvisors are typically hired for their specialized expertise in a particular asset class, sector, or investment style. For example, a large mutual fund company might hire a subadvisor that specializes in emerging market equities or a specific type of fixed-income security. This allows the main advisor to offer a wider range of investment strategies or to gain access to niche markets without having to develop that expertise in-house.

The relationship between the main advisor and the subadvisor is governed by a subadvisory agreement, which outlines the subadvisor's responsibilities, investment guidelines, fees, and reporting requirements. The main advisor monitors the subadvisor's performance and can terminate the subadvisory relationship if the subadvisor fails to meet expectations. Investors in a fund are typically not directly aware of the subadvisor, as the fund's prospectus will usually list the main advisor as the sole investment manager, even if subadvisors are employed. The fees paid to subadvisors are typically deducted from the fund's assets and therefore indirectly borne by the investors.