1.
What is a Managed Account?
Managed Accounts represents combining the best elements of direct share investing and managed funds. Managed Accounts have enjoyed significant success in the United States, S and are now beginning to gain significant traction in the Australian market. A Managed Account can be described simply as “A portfolio of directly held investments that is professionally managed”(1). The key defining feature of a Managed Account is that the underlying investment assets are held legally or beneficially by the investor, as opposed to a traditional managed fund, where investors own units in a trust.
There are many benefits of direct ownership, including transparency, portability, increased flexibility and the ability to efficiently manage tax liabilities.
Another important feature of a Managed Account is that it is professionally managed on a discretionary basis. That is, a professional portfolio manager is employed to buy and sell securities for clients on their behalf, avoiding the need to continually refer back to the client to approve and confirm transactions in their portfolio, thus streamlining the management process
2.
What is the difference between an SMA and an IMA?
There are two main categories of Managed Accounts - Separately Managed Accounts (SMAs) and Individually Managed Accounts (IMAs). The terms SMA and IMA are often referred to interchangeably, although there are fundamental differences between them.
Inherent in both of these definitions is the professional investment manager’s ability to make portfolio decisions (i.e. buy, sell and weighting decisions) without prior approval from the investor. This is generally described as the investment manager having investment “discretion” over the portfolio.
Similar to Managed Funds, SMAs offer investors access to a professionally managed share portfolio, encompassing intensive company research, detailed stock selection, and structured risk management techniques that are not otherwise available. Unlike typical direct share portfolios, SMAs are highly structured, and designed to maximise returns while at the same time protecting investors from the down-side effects of any particular adverse company or industry sector event.
4.
How does an SMA compare with a Managed Fund?
Unlike a managed fund, SMA investors can view the following information online:
Their individual portfolio holdings (typically in real time);
Any details on transactions (including dividends); and
Investment performance at anytime.
With a managed fund, this level of detail is typically not generally available; as summary portfolio information is only released periodically to coincide with the Manager's monthly or quarterly reporting cycle.
Direct Ownership of Assets
Rather than owning securities directly, managed fund investors instead own units in a pooled trust which itself purchases and owns securities. SMA investors, in contrast, are the beneficial owners of the underlying securities which generate several advantages, in particular, tax.
SMA administration is generally outsourced to an investment platform specialist, typically a major financial institution (for example, AMP, BT and Macquarie). Reporting is timely and convenient, with investors and their financial advisers able to access a range of detailed reports on investments, income transactions, taxation and other matters online, unlike a managed fund where reporting typically conforms to a monthly or quarterly schedule.
5.
How does an SMA benefit financial advisers?
SMAs typically offer financial advisers:
A compelling alternative to managed funds;
An efficient, professionally managed direct shares service;
Wanted relief from time consuming back office direct share portfolio administration;
A scalable investment solution for their clients; and
No need for additional licensing or compliance requirements as most SMAs are offered under a Product Disclosure Statement.
Given their transparency and many investment benefits, particularly around tax, SMAs ultimately represent an opportunity for financial advisers to engage their clients in a more robust, mutually beneficial advice relationship.
6.
What services does Ralton offer?
As part of the broader SMA service, Ralton provide detailed market updates on all their model portfolios on a monthly and quarterly basis. The additional detail provided on individual stock holdings is designed for investors and financial advisors to obtain a broader understanding of their investments. Typically this includes top portfolio holdings, sector exposures, key portfolio attribution along with discussion of recent buy and sell decisions.
Register below to receive our monthly portfolio reports and monthly market update
