Investor checklist: drawing up an asset management agreement

Equite.io service is developing new functionality. Now we also act as mediators between traders and investors, recruiting asset management experts. We also provide information about the specifics of investing in cryptocurrency using our blog.

In a previous post, we have already told how to choose a crypto asset manager in the cryptocurrency market. Then we warned against mistakes that can lead to а loss of money: we hope these tips will help you recognize fraudsters. Today we will return to this topic again and tell you how to secure the agreement with the manager.

Consult a lawyer

If a company or a fund acts as your asset manager, then most likely they have a standardized agreement to start cooperation. Take your time to sign it: study the document and consult with a lawyer.

Make sure that the organization does not exclude liability in a case of losing funds (for example, freezing them on a cryptocurrency exchange) and does not appropriate more profits for itself than was promised.

Fix conditions

Remember: never transfer funds to anyone. Give to the trader API keys only, without withdrawal rights. If you do not understand this term or don’t know how to get the API keys, consult the support of a cryptocurrency exchange or other resource where your cryptocurrency is stored. You can also hire a third-party cryptocurrency expert for consultation.

Before giving the keys, record all agreements with the trader in writing: at least in Google Docs format or as a Service Contract. It is important to include the following parameters:

  • The terms;
  • Trader’s profit (percentage or fixed amount);
  • Is there an additional management fee;
  • What happens in case of failure (trader's responsibility);
  • Does the trader place stop-loss orders (stops);
  • How is trading going: in manual mode or by an algorithm.

This document will be your guarantee in the event of a dispute. But its value in court is questionable because the asset management of cryptocurrencies is outside the legal field. Therefore, it is important to think about security in advance: trust only a reliable specialist, control them and make limits.