SMA assets pick up but still show vulnerability to stock market volatility
Assets in separately managed accounts increased 5% in the second quarter to $467.6 billion — but were down 31.3% from one year earlier, according to data from the Money Management Institute in Washington.
Assets in separately managed accounts increased 5% in the second quarter to $467.6 billion — but were down 31.3% from one year earlier, according to data from the Money Management Institute in Washington.
The latest data suggest that the recent stock market rally is behind the comeback, revealing SMAs’ vulnerability to swings in the equity market.
“Product innovation has been consistent in this space, and this industry will learn from this experience and address it,” said Christopher Davis, MMI president.
The challenge for SMAs, according to him, is that individual accounts tend to be heavily weighted in equities with very little exposure to fixed income and almost no ability to retreat to cash.
“If the stock market is down, that will be overrepresented in SMAs,” Mr. Davis added. “The separately managed account is almost the first account an adviser will raid to move money around.”
According to the MMI research, the investment performance of separately managed accounts in aggregate (not counting inflows or outflows) was flat during the three-month period ended June 30, compared with a 16% gain by the Standard & Poor’s 500 stock index over that period.
This marks the first time SMAs underperformed the benchmark since the MMI began tracking performance early in 2007.
SMAs constitute the largest of six categories making up the managed-solutions industry, which MMI calculates as managing $1.4 trillion in assets at the end of the second quarter.
Total managed-solutions assets were up 2.3% from the end of March but down 15.5% from the end of June 2008.
The mutual fund advisory category was up 14% in the second quarter to $383.1 billion, but down 16.7% from a year earlier.
Rep-as-adviser account assets hit $310.9 billion, up 18.4% for the quarter and down 14.7% from a year earlier.
Rep-as-portfolio-manager assets rose 17.7% to $211.5 billion in the second quarter, down 6.3% from a year earlier.
Unified managed account advisory programs, a relatively new category, reached $47.3 billion in assets at the end of June, up 2.9% for the quarter and up 9.1% over the previous year.
The MMI also provided partial data on the ETF advisory category, which held $9.4 billion in assets at the end of the second quarter, down 15.5% over the previous year. The group did not have complete first-quarter data on the ETF advisory category.
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