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Portfolio > Asset Managers

In $4 Trillion Managed Money Industry, Finding and Honoring the Top Managers

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The separately managed account industry has seen much change over the past decade or so. The total managed money universe was $4.1 trillion at year-end 2015, a 3.1% annual increase in assets, according to the Money Management Institute. While traditional SMAs saw only a slight increase in the value of assets last year, unified managed accounts (UMAs) and rep as portfolio manager (RPM) programs posted what MMI called “healthy gains” of 24.4% and 5% in assets, respectively.

Within that industry are many managers plying many different strategies, but when it comes to advisors, “they want the strategies [and] they want the simplicity of one statement” that a UMA can provide, said Tim Clift, Envestnet | PMC’s chief investment strategist and a member of the awards committee that named 17 strategies as finalists in the 12th annual SMA Managers of the Year honors (click here for a list of the finalists and a description of the process by which they, and the winners, were picked).

Beyond models-based SMA portfolios, Clift said that at Envestnet | PMC, “we’re getting a lot of demand for bond portfolio UMAs” from advisors, which he noted are “much more difficult operationally.”

One “standout” growth area in SMAs is in municipal fixed income, said Clift, since end investors and their advisors are looking for income but also “tax sensitive” investing.

That ability to meet the needs of investors through portfolios using proprietary research by a committed team, employed by an asset management firm that’s committed to the strategy, are just two of the criteria that’s used to name the SMA Managers of the Year finalists and, eventually, the winners of this year’s awards. The winners will be announced during Envestnet’s Advisor Summit May 18-20, with ThinkAdvisor editors reporting and writing — and videotaping — the event, and the winners in the July issue of Investment Advisor and throughout July on ThinkAdvisor.

So what do these 17 strategies have in common? Nathan Behan, who heads Envestnet | PMC’s fixed income team as senior vice president of investment research, said, “There’s a great lack of commonality among the managers” honored as finalists. “They’re doing something different compared with their peer group,” he reported, which is why they stand out.

Behan said that the awards tend to honor managers “whose research process matches not only their philosophy but what the market is making available to them” at any given time. Both the investment thesis and their investment philosophies “should evolve over time based on what the markets are giving you,” Behan said.

Clift concurs. When it comes to the honorees and what sets them apart from their peers, “generally they’re very focused. They don’t cover every asset class.” In other words, Clift said, “they do one or two things really well.” Those firms that win “tend to have very experienced professionals” on their teams, both as senior portfolio managers and as analysts. “Typically,” Clift said, “we see these firms exhibit better-than-average downside protection, which tends to lead to longevity.”

Staying close to their professed alpha thesis, showing flexibility when the markets demand it, boasting portfolio managers and analysts with long tenures and being good at protecting against the downside: These are the common traits of the 12th annual SMA Managers of the Year. Clift said there is one more common trait.

“Nathan [Behan] said it well: They know their limitations. If there are things going on in the markets that they don’t understand, instead of taking a chance, they may step aside.” And consistently, “they don’t make unwise decisions.”

— Read more on our past SMA Managers of the Year on the SMAMOTY homepage.


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