Managed Account Assets Reach $1.5 Trillion

Assets in managed accounts, which include separately managed accounts and also mutual fund advisory programs, representatives as portfolio managers, exchange-traded funds and other instruments that are sold through programs or platforms, reached $1.503 trillion in the third quarter, up 19.6% from $1.256 at the end of the fourth quarter of 2006, the Money Management Institute reports.

Broken out separately, separately managed accounts reached $808 billion in assets at the end of the third quarter, up 13.9% from $709 billion at the end of the fourth quarter of 2006. The large-cap growth domestic equity strategy grew 13.6% in the third quarter, adding $14 billion in assets, but the two largest SMA strategies remain municipal and multiple discipline products.

During the third quarter, managed account solutions grew 4.7%, whereas the S&P 500 rose 2%, indicating significant organic growth in the industry, MMI said.

“Professional advice has fueled industry growth,” said Mark Pennington, a partner in the global relationship management unit of Lord Abbett. “Over the past few years, the managed account solutions industry has seen a growth of offerings, including discretionary and non-discretionary mutual fund advisory platforms, UMAs and traditional SMAs. However, no matter what the end solution, the process of investors working with professional financial advisers and seeking professional investment management continues to be the prime engine of growth for the industry.”

MMI also reported that wirehouses manage 65.2% of the assets in managed account solutions, down 3.9% in the past year, which indicates that other sponsor firms are gaining market share. Representatives as portfolio managers’ market share grew 8.4% market share, and the mutual fund advisory market grew 7.2%.

Model portfolios are also fueling industry growth and are easier for sponsors to customize for investors, such as handling tax-sensitive investing or socially responsible investing requests.