What is an SMA?

A separately managed account (SMA) is a portfolio of assets managed by a professional manager or investment firm. The manager uses their resources and skill to manage the portfolio to achieve the intended investment objective. The investor appoints the manager to manage their portfolio of assets in accordance with a portfolio construction and objective that is common to a group of other investors seeking the same outcome or investment experience from that particular manager. Each investor’s account is separate from the others and, due to the timing and amount invested or redeemed, performance will be similar, but not the same, as other investors in that managed account.

Why use SMAs?

Managed accounts can have a number of advantages over other approaches to portfolio management such as doing it yourself or via a managed fund. The level of benefit received from using an SMA will depend on may factors, though the key reasons for considering an SMA are:

  • Appointing a professional manager can result in a superior risk management outcome than typically achieved through managing your portfolio yourself.
  • Your SMA portfolio, its cost base and tax position are unique to you and can, usually with the assistance of your adviser, be optimised for your benefit on an after-tax basis.
  • Your SMA is housed and your assets held on a government regulated administration platform which provides great confidence that your assets are in safe custody and can be very efficiently managed and transacted by the SMAs portfolio manager.
  • Ultimate control rests with you, the investor. You can, usually in consultation with your adviser, turn the appointment of the manager on and off. This does not create a tax event and is typically used to manage a change in personal circumstances or to achieve a superior tax outcome.
  • Administration platforms provide 24-hour online reporting access and a host of other reports required for portfolio monitoring and tax information.

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