Wall Street firms are increasingly looking to market separately managed account to small institutions, such as local churches, schools and not-for-profits, Dow Jones reports.
"Many things that were once available to plans with $100 million or greater are now accessible to clients with $1 million in assets," said Brian O'Donnell, director of Morgan Stanley's institutional consulting group.
At the same time, small organizations, O'Donnell said, "are gravitating to more sophisticated investments than their larger brethren have historically used."
Separately managed accounts increasingly appeal to smaller institutions as minimum investments are dropping to as little as $100,000.
Separately managed accounts have surged in popularity in the past year, going from about $521 million to $707 million, an increase of approximately 36%, according to a report from Cerulli Associates of Boston.
Institutional investors account for about 16% of the market, Cerulli figures show.
Smith Barney has 900 institutional clients, each with less than $50 million in assets under management. "For a couple of million, you can bring the cost structure down below what it would be for a mutual fund," said Norm Nabhan, a managing director with Smith Barney's consulting group. Unlike mutual funds, fees are often negotiable, and SMAs can address certain tax issues especially effectively.
Fees are an important issue to many not-for-profit boards, and that creates an SMA "sweet spot" for advisers with clients whose accounts are between $1 million and $5 million, according to Tom Meyer, a Schwab-affiliated advisor in Marlton, N.J. "The board wants to know exactly what the fees are," he said.
"It's a niche market," said Jeff Carlin, a vice president of Schwab's managed accounts group. Recently, he said, he describes it as a "front burner" issue.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.