When advisors outsource their investment management, the strategists they want to employ should post healthy performance numbers. More important, however, is that they can clearly articulate the strategy that yields that performance and then can repeat that strategy regardless of how the overall market or sectors or subsectors within the market are performing.
This will be the 11th year that Investment Advisor has partnered with Envestnet | PMC to research and honor investment strategists working in the separately managed account space with the Separately Managed Account Managers of the Year awards. The process begins with a look at SMA managers in the standard categories that have been consistent since the first awards were given in 2004: U.S. equity large cap; U.S. equity small-, mid- and SMID-cap; fixed income; global or international equity and a specialty category whose candidates differ each year much as the market’s top and bottom performs differ from year to year.
For the first time in the awards program, we are adding two new categories of winners, reflecting trends in the SMA industry which themselves reflect trends among advisors and their end clients. The Impact award winner recognizes a portfolio manager who has achieved sustained success in impact investing—the notion that an investor’s investment portfolio should reflect their personal beliefs and preferences, whether it concerns corporate governance, sustainable investing or other social or religious beliefs. Since model portfolios are attracting so much attention from advisors and their clients as opposed to traditional SMAs where the manager builds a portfolio for each investor one security at a time, we also thought it appropriate to name a Strategist of the Year.
Finally, from among the individual winners the awards committee chooses an overall SMA Manager of the Year, which can be considered as a first among equals who nevertheless is worthy of particular honors.
So why care about SMAs? Why honor managers in this space? First, there’s the size of the overall market, and the growing involvement of non-wirehouse advisors in the space. Tim Clift, CIO of Envestnet | PMC (which includes the intellectual capital of researchers from the former Prima Capital, which Envestnet acquired), says that by Cerulli’s reckoning, as of year-end 2014 there was $838 billion invested in some form of SMA, or about 20% of the $4 trillion invested in managed money. While Clift notes that there’s been a decline in overall in SMA assets since 2008, when SMAs accounted for 35% of all managed money, over that same time there’s been a big shift toward model SMAs.