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Investor Education > Separately Managed Accounts > Why invest in an SMA?

WHY INVEST IN A SEPARATELY MANAGED ACCOUNT?

Separately managed accounts (SMA) are described as managed funds on steroids as they combine many of the benefits of investing in a managed fund with the benefits of investing in direct shares. Typically, you would apply for an account in a separately managed account, just as you would apply for units in a managed fund.

You can invest in a separately managed account for as little as $5,000 across a single or multiple models within the SMA and management costs are about half the cost of a managed fund. Importantly, the securities in the account are visible and portable just as they would be if they had been purchased directly and the underlying shares are owned, not units in a fund. As a result, the investor can manage the tax position and receive dividends and franking credits.

There are other key advantages of a separately managed account:

Beneficial ownership
Typically, you would apply for a separately managed account just as you would apply for units in a managed fund. But as a separately managed account holder, you actually own the underlying stock in your portfolio, i.e. you retain what is called beneficial ownership of the underlying securities.

Professional management
Separately managed accounts generally have a responsible entity in the background with custodial and administrative responsibility. Some models will be actively managed, while others will track an index.

Cost effective
Separately managed accounts take advantage of new technology and online delivery resulting in lower management fees than managed funds. Fees can vary across products and should be checked closely. Generally the fee structure includes an administration/management fee, performance fee (depending on the models invested in), adviser fees (unless you choose a direct access option), as well as brokerage. In addition, investors can take advantage of the fund manager’s buying power by accessing institutional brokerage rates of as low as 0.05%. 

Consolidated reporting and simplified paperwork
Buying direct shares would normally generate significant paperwork. Investing through a separately managed account provides you with consolidated reports on the entire portfolio online at any time to help simplify the preparation of the annual tax return. In addition the tax cost base of shares is automatically adjusted with each trade and dividends and corporate actions are automatically recorded.


2020 DIRECTINVEST offers a direct access separately managed account called the 2020 DIRECTINVEST BlueChip Series with total fees of less than 1% pa. The BlueChip Series offer all the benefits of a separately managed account and includes features such as netting and blending.

 

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