PAM Guide to Wealth Management

Separately managed accounts

A separately managed account, sometimes referred to as a segregated account, can comprise discretionary, advisory, or execution only services. You can appoint a private asset manager to run a tailored portfolio on your behalf. The manager will invest in a range of asset classes and is likely to hold individual stocks and collective investments.

It is argued that an attraction of separately managed accounts is that they allow you to customise your portfolio. You can set both your benchmark and risk controls in accordance with your individual investment objectives and can include any asset classes.

The underlying investments, asset classes and risk profile can be changed at any time according to your wishes. You do not have to pool your assets with those of other investors if you only hold direct securities. Separately managed accounts can be constructed to produce the amount of income you want and when you need it, as well as the level of growth you require and over the desired time period.

You need to consider how much benefit you will receive from customisation, however. The potential choice of thousands of collective investments offsets some of the advantages of the customisation of separately managed accounts.

To avoid duplication of shares within the portfolio you may want the control granted by separately managed accounts and direct securities. With collective investments, you may not be able to determine the underlying securities to avoid or limit the duplication of holdings.

With a separately managed account, you can set defined objectives and change these over time. Nevertheless, you can establish a personalised benchmark for both collective investments and separately managed accounts. You should be able to find collective investments to match your objectives and risk profile.

Check the way in which the private asset manager charges you for the separately managed account. This may be an annual charge in the form of a percentage of the assets under management in the separately managed account, or there may be a fee for each transaction.

There are question marks over the quality of the fund managers you can access through separately managed accounts. An asset manager offering separately managed accounts will not have a monopoly on the best investment managers available in the market. Therefore, you may have a better selection via collective investments. As we said earlier, however, asset managers may anyway select collective investments for segregated managed accounts.

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