What are Separately Managed Accounts?
Separately Managed Accounts
A Separately Managed Account (SMA) provides investors with access to transparent professionally managed investment portfolios through tax-efficient structures and with an online reporting platform.
There is no precise way to define an SMA. The characteristics of an SMA have been deployed in various ways and under a variety of legal structures around the world. In some cases SMA investors directly hold assets, whilst in other cases SMAs have been deployed as collective investment schemes.
Præmium is the first to deploy an authorised collective investment scheme which utilises SMA technologies to offer many of the advantages of other SMAs to retail investors.
The benefits that SMAs bring to the investor include:
| Access to Professional Investment Management |
Investment models are created by professional Investment Managers. The Investment Managers could be established Fund Managers, boutique or specialist managers; or they may even be brokers or other money managers who would not usually provide investment management services to traditional collective schemes. |
| Tailored Portfolio |
Investment Models provided by multiple Investment Managers can be blended to create an individual portfolio tailored to meet the risk profile and investment objectives of each Investor. |
| Transparent |
Providing unprecedented transparency, SMAs enable the Investor and their Financial Adviser to see exactly what underlying investments are held within the SMA and managed on their behalf by the Investment Manager. The SMA platform also provides information about the individual performance of the portfolio components including income produced, corporate actions and charges. |
| Tax-Efficient |
SMAs can be provided in a range of tax-efficient structures, depending on the needs of the investor. Investors in SMARTfund hold units in an Authorised Unit Trust (AUT). Like any other UK AUT, capital gains made by SMARTfund will not attract tax. SMARTfund investors will only be charged capital gains tax at the time that they realise a gain on the disposal of all or part of their investments. Investors in some forms of SMAs may retain beneficial ownership of the assets in which they invest rather than hold units in a fund. These investors may benefit from alternative tax-planning opportunities. The structures available may depend on the qualifications and of the Financial Adviser recommending the SMA and/or the financial sophistication of the investor. |
| Online Platform |
Investors and their Financial Advisers are able to review portfolio valuation, transaction, performance, asset allocation, and tax reports through the online platform. Non-SMA assets can also be recorded on the platform to provide a single consolidated view of an investor’s portfolio. |
Is this a new concept?
Although the term SMA might be relatively unknown in the UK, the concept is well known in other international marketplaces.
The SMA concept was originally developed in the United States in the 1970s as a personalised approach to money management. Today, over US$1.5 trillion* is invested through Managed Accounts in the United States.
SMAs have also recently been introduced to the Australian market, where they have been lauded as the next evolution of the wrap platform.
In the UK, Discretionary Managed Accounts or DMAs (also known as Individually Managed Accounts or IMAs) are a better known concept. Under an IMA mandate an authorised person who is a discretionary manager receives a mandate from an investor to manage an individual portfolio of assets to meet the specific needs of that investor. Minimum investment amounts often exceed £1m per portfolio due to the amount of individual attention which a tailored service requires for the discretionary manager. Many discretionary managers aspire to provide this service to but the amount of individual attention required to provide a tailored service results in a high-barrier to entry, with minimum investment amounts often exceeding £1m per portfolio. Præmium’s technologies can also be deployed for the efficient operation of Discretionary Management businesses.
SMA platforms can be used to reduce the time, effort and cost associated with managing individual portfolios so reducing the barrier to entry and freeing up time to harvest new clients.
SMAs also enable the Adviser or Wealth Manager who ‘owns’ the client relationship to focus on that and either centralise or outsource the actual investment decisions.
SMAs are the next logical step in the evolution of the marketplace, providing greater transparency and access to professional Investment Managers to the client, while preserving the adviser/client relationship.
* Cerulli Managed Account Quantitative Update, 2006
General Reading
Want to find out more?
Contact Præmium today to find out more about SMAs in the United Kingdom.
- Email: enquiries@praemium.com
- Telephone: +44 (0) 207 562 2450
If you would like to submit an online enquiry, please click here.