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Are SMAs Growing, or Not?

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There are conflicting signals within the industry about the health of the separately managed accounts business. Bob Cunha, principal at Market Metrics in Quincy, Massachusetts, who presented its annual research polling 400 advisors at the Money Management Institute’s annual gathering in Washington May 2, said unified managed accounts will grow substantially in the coming years, and it’s important for money managers “to get on the train.” Cunha added that UMAs “are the wave of the future,” and will help money managers grow a “higher margin mutual fund business.”

But at the Investment Company Institute’s annual event in Washington later that month, John Streur, senior managing partner at Managers Investment Group, said that growth of separately managed accounts is declining, and will continue to do so. Streur said that mutual funds grew more than separate accounts in the last quarter of 2006, noting “advisors and investors have found limitations with SMAs and use them as niche products.” Peter Cieszko, president of global distribution for Evergreen Investments, who joined Streur on the same panel, said that use of SMAs continues to be dominated by wirehouses; 12% to 14% of RIAs use SMAs, he said. More advisors haven’t embraced SMAs, he said, because there’s no way to deliver them to investors, adding that the fund industry is “looking at this.”

When it comes to separately managed accounts, performance is the top issue for advisors, according to the Market Metrics poll. But strong sales and marketing support are important as well because it helps to “accelerate growth for money managers,” added Joe Babiec, principal at Market Metrics, who joined Cunha in presenting the research’s findings.


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