Probably the biggest benefit of separate accounts is their performance, Barron’s reports. The reason equity separately managed accounts returned 10.96% over the past 10 years, whereas equity mutual funds returned 7.78%, is the personal oversight of a broker or financial adviser and SMAs’ ability to rotate among different investment styles. Also, SMA programs are always weeding out poor performers.

Also, SMAs do not penalize an investor with embedded capital taxes; investors buying a mutual fund may have to pay taxes on returns they did not experience. In addition, SMAs can minimize income-producing parts of a portfolio.

But the biggest downside to separate accounts, Barron’s says, is their fees. SMAs can cost between 1.25% to 2.7%, whereas mutual funds average 1.42%.


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.

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