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Separately Managed Assets Creep Up

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NU Online News Service, May 23, 4:53 p.m. – U.S. financial services companies held $414 billion in separately managed account assets at the end of the first quarter, up 3.4% from the end of the first quarter of 2001, according to new figures from the Money Management Institute, Washington.

MMI bases its asset estimates on reports from five large companies that represent about 70% of the managed account market and a survey of several smaller firms that act as proxies for the other players.

Although managed account assets have been relatively flat over the past 18 months, MMI, a trade group for the managed account companies, argues that the slowdown will end once baby boomers get more serious about saving for retirement and start collecting inheritances.

“Longer-term factors favor much stronger growth in industry assets up through the end of this decade,” MMI Executive Director Christopher Davis said in a statement about the latest quarterly results.

Separately managed accounts serve wealthy investors who want diversification but also want to avoid the capital gains taxes, panic selling and other headaches associated with conventional mutual funds. The money managers who run the accounts buy portfolios of stocks and bonds suited to the needs of each client. The managers usually charge asset-based fees, rather than collecting transaction-based commissions.

The Financial Research Corp., Boston, recently predicted that managed account assets will reach $1 trillion by 2005, and $3 trillion by 2011.

Many financial services companies and support companies continue to announce major managed account initiatives.

Evergreen Investment Company, the mutual fund arm of Wachovia Corp, Charlotte, N.C., a giant bank holding company, said earlier this month that it will be starting a managed account division, Evergreen Portfolio Solutions.

SEI Investments Inc., Oaks, Pa., a large fund manager and administrator, reported it will be reducing the investment minimums for seven of its 13 managed account managers to $100,000, although two still require an initial investment of $1 million or more.

Meanwhile, Advisor Software Inc., Lafayette, Calif., is emphasizing that its new investment management software for financial institutions can handle separately managed accounts. Other financial services software companies, such as Tamarac Inc., Seattle, have also been promoting separate account management applications.