What is the role of an investment adviser with discretionary authority?

An investment adviser with discretionary authority is empowered to make investment decisions and execute transactions on behalf of their client— in this case, the government—without needing to obtain prior approval for each individual transaction. This level of authority allows the adviser to act swiftly in response to market conditions, invest in opportunities as they arise, and manage the portfolio effectively to align with the strategic goals of the government.

By having discretionary authority, the adviser is expected to make informed decisions that reflect the government’s investment objectives and risk tolerance. This autonomy is particularly important in dynamic markets where timely decision-making can significantly impact investment performance.

In contrast, advisers who do not have discretionary authority must seek the government’s approval for every transaction, which can hamper investment agility, and those who act solely as safekeeping agents do not have the role of making investment decisions. Additionally, while indemnification for counterparty failures may be a concern in investment management, it is not a function or role of an investment adviser with discretionary authority. This further validates why executing investment transactions on the government's behalf accurately reflects the adviser’s primary responsibility in this context.