Introduction to SMA

A separately managed account, or SMA, is a portfolio of securities managed (for you) by a professional asset management firm. It’s like having your own private mutual fund—instead of managing a portfolio of securities for a group of investors, the portfolio is being managed for you alone.

Money managers offer investors targeted strategies for their separate account assets. In a separate account, funds are not pooled with the investments of other investors like they are, for example, in a mutual fund. Investors can choose from a range of approaches in order to create a portfolio that is oriented towards their individual investment goals.


Benefits of SMA

For the right investor, SMAs can check several boxes on your investment goal list. Here are some reasons to give SMAs a look:

  • Broad Choice: Access to a broad choice of investment strategies that may not otherwise be available in fund format.
  • Control: The client has control of their individual account (vs. being pooled with investors e.g. mutual funds).
  • Ownership: The client has full beneficial ownership of all securities in their individual account.
  • Custody: Client assets are held by the wealth manager or its own appointed custodian.
  • Cost Efficiency: Cost efficiency with fewer layers of fees and charges.
  • Highly Customisable: Ability to customize individual accounts to match individual client preferences.
  • Transparent: Full transparency of all securities holdings and transactions for each individual client.
  • Simple Fee Structure: Full transparency of individual client fees and charges.


Driving Forces of SMA

According to the second quarter issue of The Cerulli Edge―U.S. Managed Accounts Edition, separately managed accounts saw a 34% YoY growth from 2020 to 2021 and now comprise about 16% of the $9.1 trillion managed accounts industry. Some of the driving forces of SMAs are:

  • COVID-19: Advisory-driven mandates are not as adept at dealing with market volatility during events such as COVID, with discretionary mandates significantly outperforming.
  • Strategic DPM Focus: Discretionary Portfolio Management (DPM) is a growth area in Asia, with Asia trailing behind the rest of the world in DPM penetration.
  • Market White Space: Being able to offer clients highly customisable, professionally managed portfolios is a very unique value proposition in Asia.
  • “Robo” is not the solution: Robo advisors have static strategies which cannot work cross-border easily, and cannot match the breadth of strategies on offer in an SMA marketplace.
  • Sales Inefficiencies: Increasing regulatory burden to reduce churn and explain rationale behind each trade for the client portfolio.
  • Operational Inefficiencies: Building and maintaining infrastructure in-house is time and resource intensive. Third party providers benefit from economies of scale.
  • Remuneration Models: Regulatory push against portfolio churning, giving rise to the principal- agent problem. Fee-based services help align the incentives to provide greater trust and transparency.
  • Cross Border Accessibility: Growing demand for offshore investments as regulations liberalise and clients seek diversification.
About Axial Partners
Axial Partners Limited is a first of its kind independent managed account platform provider for private banks and wealth managers to offer discretionary portfolio management services to their clients. Established in 2016, Axial Partners has a vision of a world where investors are seamlessly connected to optimal strategies to reach their financial goals. Axial is 100% owned by Privé Technologies, a wealth-tech company providing state-of-the-art enterprise software solutions to financial institutions globally.
Axial partners with top-notch investment advisors from around the world to provide private banks and wealth managers with access to a wide variety of investment strategies to custom design their offerings. As part of the Privé Technologies group, Axial uses the latest technologies not only to optimize operational efficiency but more importantly, to be able to offer a hyper-personalized client journey from onboarding to reporting.