SMAs Becoming Standard Operating Procedure

August 24, 2004, 1:00 a.m. EDT 1 Min Read

Thirty years after their introduction, separately managed accounts are now popular enough to almost be considered mainstream, CBS MarketWatch reports.

After an increase in assets of 19.4% from second quarter 2003 to second quarter 2004, SMAs possess $528.7 billion in assets, a number a leading research firm thinks will double to more than $1 trillion over the next four years.

The new numbers, reported by the Money Management Institute, are largely the result of people rolling money from IRAs into SMAs. Further, MMI says that 40% of SMA money over the next four years will come from these IRA rollovers.

Paul Fullerton, associate director of Cerulli Associates, said the firm expects that $528.7 billion to double by 2008. He agreed with the MMI that most SMA money is handled by financial institutions, and said money managers are targeting affluent and high-net-worth investors to move into SMAs.

"To date, managed accounts are overwhelmingly delivered in conjunction with a dedicated adviser," Fullerton said.

Eight huge wirehouses still carry the crux of the SMA money. More than than two thirds of managed account money is handled by those top eight firms.

While formerly only available to clients willing to invest six figures, SMA minimum deposits have dwindled. In fact, one firm that sells SMAs, Denver-based Curian, allows clients to open managed accounts with just $25,000. That seems to make Cerulli Associates prediction to stand up that the SMA industry will only grow.