Definition of Qualified Professional Asset Manager (QPAM)


What is a Qualified Professional Asset Manager (QPAM)?

A Qualified Professional Asset Manager (QPAM) is a Registered Investment Advisor (RIA) who helps various institutions make financial investments. The focus of a QPAM is on retirement accounts, like pension plans. QPAMs are beneficial to mutual funds because if a QPAM manages a mutual fund or retirement plan, they can transact in areas prohibited by the Employee Retirement Income Security Act (ERISA).

Key takeaways

  • A Qualified Professional Asset Manager (QPAM) is a registered investment advisor who helps institutions make investments.
  • The focus of a QPAM is on retirement accounts, like pension plans.
  • By employing a QPAM, mutual funds can operate in areas that ERISA would otherwise avoid. This is known as a QPAM waiver.
  • Banks and insurance companies can qualify as QPAM as long as they are investment advisers registered with the Securities and Exchange Commission (SEC).
  • A QPAM is also defined as a registered investment advisor with AUM of at least $ 85 million and equity of $ 1 million or more.

Understanding from a Qualified Professional Asset Manager

ERISA defines the criteria to qualify as a QPAM. Regulated institutions, such as banks and insurance companies, can qualify as QPAM. Under the amendments that went into effect in August 2005, a QPAM is also defined as a registered investment advisor with client assets under management (AUM) of at least $ 85 million and a shareholders’ equity of $ 1 million or more.

Mutual funds can normally benefit in a regulatory way through the QPAM exemption. The QPAM exemption is widely used by parties who transact with accounts that have retirement plan funds. In essence, the QPAM exemption allows an investment fund managed by a QPAM to participate in a wide range of transactions that would otherwise be prohibited by ERISA.

ERISA prohibits certain transactions when an ERISA-governed plan or fund conducts business transactions with an entity that may be in conflict with respect to that plan or fund. When a QPAM is in the equation, the restriction is lifted with virtually all parties, such as plan sponsors and plan fiduciaries. However, such transactions cannot be entered into with the QPAM itself or with those parties that may have the power to influence the QPAM.

An important role for QPAMs is to represent pension plans when they want to participate in private placements. The role of the QPAMs is to examine the private placement of the pension fund. Qualified professional asset managers can also help investment plans invest in real estate or other alternative investments.

Qualified professional asset managers and prohibited transactions

A qualified professional asset manager may enter into a transaction that would normally be prohibited under section 406 (a) of ERISA. Such transactions may include sales, exchanges, leases, loans / extensions of credit, and the provision of services between an interest party and a pension plan. Using a QPAM can eliminate the risk of trustees being personally liable for errors as long as they use the QPAM wisely. However, the use of a QPAM is not a shield for breach of fiduciary duty.

Qualified Professional Asset Manager Qualifications

The qualifications for a qualified professional asset manager are codified in Prohibited Transaction Class Exemption 84-14 issued by the Department of Labor. Are:

  • The QPAM must be a bank, savings and loan association, or insurance company with equity capital or equity greater than $ 1 million or a registered investment advisor with assets under management in excess of $ 85 million and greater equity capital to $ 1 million.
  • The counterparty must not be the QPAM or be related to the QPAM or the trustee designated by the QPAM. A related entity is one in which QPAM owns 10% or more of the other entity, or a person who controls or is controlled by QPAM owns 20% or more of the other entity, or the person who controls or controls the part interested. owns 20% or more of QPAM.
  • The asset manager must declare in writing to the client that they are acting as trustee.
  • The QPAM must negotiate the terms of the transaction and decide on behalf of the plan whether to participate in the transaction.
  • QPAM may not have been convicted of certain activities that could affect financial confidence.
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Mark Holland

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