Separately Managed Account

In a pooled fund, such as a mutual fund, many investors own shares of a single portfolio. In a separately managed account, the investor directly owns the individual investments, and the manager makes decisions on their behalf.

SMAs offer several advantages: customisation, such as excluding certain companies or sectors; transparency, since investors can see exactly what they own; greater control; and, in some countries, tax benefits, such as the ability to sell individual holdings at a loss to offset gains.

For example, a large pension fund might give an asset manager a separately managed account to invest in bonds, with rules excluding certain industries and limiting exposure to individual issuers. In private markets, large investors may set up separate accounts with managers to invest in private credit or private equity on customised terms.

SMAs usually require larger minimum investments than funds, although technology has made them available to more individual investors. Costs can be lower or higher than funds, depending on size. SMAs are widely used by institutions, high-net-worth individuals and through wealth management platforms.