The Growth Trajectory of Separately Managed Accounts Continues

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The Growth Trajectory of Separately Managed Accounts Continues

July 2018


While Exchange-Traded Fund (ETF) and mutual fund flows tend to garner headlines, a somewhat overlooked area of consistent growth is Separately Managed Accounts (SMAs). 

SMAs may still have significant runway for growth due to the accessibility they provide individual investors to institutional-caliber management and expertise. Along with other investment industry analysts, we believe that individual investors may drive the majority of future growth and demand for customized investment strategies.


As shown in Exhibit 1, SMAs experienced a compound annual growth rate (CAGR) of 10% and consistently outpaced mutual funds in net sales growth rates for a two-year period through the first quarter of 2018, according to an analysis by Intermediary Analytics. During the same period, ETFs and mutual funds recorded CAGRs of 21% and 8%, respectively.


Exhibit 1

Net Sales growth rates by investment vehicle Source: BNY Mellon Intermediary Analytics℠

The majority of SMA net sales occurred in Unified Managed Accounts (UMAs), which are professionally managed private investment accounts. Using the UMA model, SMAs can accommodate multiple types of assets in a single account, thereby offering individual investors a customizable approach for meeting their overall investment objectives. SMAs can also offer ownership in underlying securities and greater flexibility for tax strategies.


SMA growth also appears to be driven partly by an increased use of model delivery, which are model portfolios for investment strategies that seek to address investors' specific needs. Model delivery has made the deployment of U.S. equity strategies a cost-effective approach for asset managers and broker-dealers. SMA fees are marketed as attractive for individual investors relative to mutual funds and active ETFs (based on a range of publicly available pricing with a minimum investment for an equity-based SMA of $100,000 or less).


As shown in Exhibit 2, more U.S. equity and municipal fixed assets were held by SMAs than either mutual funds or ETFs in the first quarter of 2018. SMAs comprised 35% of U.S. equity assets in the first quarter of 2018, while ETFs were 34% and mutual funds 31%. Also of note, a particularly high rate of municipal fixed assets were held in SMA accounts (55%), compared to mutual funds (39%) or ETFs (5%).


Exhibit 2

Percentage of AUM Q1 2018 Fee based programs Source: BNY Mellon Intermediary Analytics

This is one example of how analytics can provide a holistic view of asset sales and trends, as well as help asset managers pinpoint opportunities for specific asset classes and investment vehicles.

How We Help

Access to business intelligence based on comprehensive asset, sales and net flow information for Mutual Funds, SMAs and ETF products is critical for making informed business decisions. The Intermediary Analytics solutions suite offers an intelligent way to assist asset managers and broker-dealers in developing and executing sales and distribution strategies with precision. This business intelligence is readily available through our Distribution Management System portal and consultative services provided by our relationship management team.


Contact BNY Mellon below to learn more about Intermediary Analytics.

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