Separately Managed Accounts: A Mutual Fund Alternative

The investment management world is divided into retail and institutional investors. On one side are the traditional products designed for middle-income individual investors, like the retail classes of mutual funds; these have modest initial investment requirements. On the other side are managed strategies for institutions, with imposing minimum requirements of $25 million or more. In between these, however, is the growing universe of separately managed accounts (SMAs) targeted at wealthy (but not necessarily ultra-wealthy) individual investors. This article will examine the world of SMAs and what investors - or their financial advisors - should keep in mind when considering these investment vehicles.

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While there are some 5,000 separately managed account products in the market, not all are “considered legitimate SMA management firms for managing an advisor’s client capital,” according to Prima Capital Holding President J. Gibson Watson III. “Of this universe, Prima estimates that there are about 1,400-1,500 SMA products managed by 600-700 firms that are suitable for high-net-worth investors,” according to Watson. Even whittled down to a mere 1,500 accounts, the task of sifting through all that’s available to find the best can be daunting.

To give advisors a head start on that heavy lifting, Standard & Poor’s, Prima Capital, and Investment Advisor have teamed up for the third year to find the most outstanding separate accounts and their managers, and recognize them with the 2007 Separately Managed Accounts Awards.

ETFs Fuel Managed Account Growth