Separately managed accounts continue to grow at a much faster pace than mutual funds, Barrons reports. In the 12 months through March 31, assets in SMAs rose 36% to $530 billion, and by 2008, they should top $1 trillion, according to
- Offering tax advantages over mutual funds is one of the primary factors driving their growth, as investors can harvest tax losses in an SMA since they hold securities in these vehicles outright. Mutual funds, on the other hand, are subject to embedded capital gains.
But there are other factors fueling SMAs growth. Changes in the way financial advisers approach customers is also a dynamic, and the ability to customize SMAs works well with the new fee-based, as opposed to transaction-based, model.
Many investors also like their transparency, while others swear by their superior performance to mutual funds.
Nonetheless, separate accounts still have their detractors. Fund consultant Burton Greenwald says some investors have mistakenly gravitated to SMAs as a status symbol, and