Mutual fund companies trying to make a name for themselves in separately managed accounts are finding out that it is not for the feint of heart.

In the last few years, a number of traditional fund companies have observed the amount of cash being put to work in SMAs and decided to follow the money trail. The most obvious reason this move made sense for these firms was that it provided another way for them to market their existing portfolio management expertise, according to Matt Schott, a senior analyst at Needham, Mass.-based TowerGroup Research. Another reason, one that many firms wouldn't like to admit, is more of a defensive measure in that they wanted to ensure that customers didn't look to park their money elsewhere as the SMA product has grown in popularity.

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