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Investor Education > Separately Managed Accounts > Glossary

MANAGED ACCOUNTS GLOSSARY

Separately Managed Accounts Glossary

Beneficial ownership When an investor has a vested and indefeasible interest in the assets held in their personal portfolio.
Blending  When an investor chooses a number of model portfolios, in the proportions of their choice, to construct their personal portfolio.
Compulsory cash component The percentage of cash held within the account to facilitate trading and payment of fees.
Corporate actions  An action taken by an entity for the purpose of giving an entitlement to holders of a class of the entity's securities.
Fixed model portfolio weighting  When the SMA provider makes trades during rebalancing to ensure the proportions of the personal portfolio, attributable to each model portfolio, remain as originally selected.
Floating model portfolio weighting  When the model portfolios perform differently from each other, relative to the proportion of their personal portfolio, and move (float) away from the model portfolio weights that were originally selected and are not adjusted by the SMA provider.
Holding lock When an investor transfers an existing stock holding into the SMA and fixes this holding at a level of their choice. When the investor's personal portfolio is rebalanced, the nominated stock holding is maintained at, or above, the selected level. This is often used to protect tax parcels.
Inherited tax liabilities  When an investor purchases a pooled unitised fund, they also buy the realised and unrealised gains. Accordingly, a portion of the price may be attributed to previously derived Capital Gains Tax (CGT) income. The investor would then be entitled to a distribution of this income which would be taxable.
In specie transfer  When an investor's existing stocks are transferred into their personal portfolio.
Intellectual property From an SMA perspective, this is the stock picking strategy of the model provider.
Managed discretionary account (MDA) An umbrella term used to refer to any services where the clients hand in their money or other assets to the MDA operator and give that operator the discretion to manage those assets on their behalf.
Managed investment scheme (MIS)  Also known as managed funds, pooled investments, or collective investments. It is a scheme where money is pooled together with that of other investors in exchange for an interest in the scheme.
Minimum trade size When securities in a personal portfolio are only traded if the trade size meets the specified size. It is the smallest trade that can be done in a personal portfolio.
Model portfolio  An investment strategy selected by the adviser and managed by a model portfolio manager on an ongoing basis.
Model portfolio manager The manager of the model portfolio (referred to as the model portfolio adviser, model provider or the fund manager).
Netting When buys and sells are matched and off-set against each other. Can be done at both portfolio and scheme level.
Nominated Representative Generally a financial adviser, or professional adviser, who will provide all instructions to the SMA provider on behalf of the investor.
Non-beneficial ownership  As opposed to beneficial ownership. Usually when the clients invests in shares within a unitised managed fund.
Personal portfolio An investor's account into which their investments are allocated within an SMA. A personal portfolio is generally constructed using a selection of model portfolios and a compulsory cash component.
Rebalancing The process where a client's actual holdings are compared to the updated model portfolios and changed accordingly.
Rebalancing date Usually each business day before the market opens.
Responsible entity The licensed entity or body that operates a managed investment scheme or separately managed account.
Sell-down When securities are sold at the client's discretion.
Separately managed account (SMA) A portfolio made up of securities that are beneficially owned by the individual investor and managed by professional managers. Unlike investing in a managed fund, an SMA investor can add, delete or 'lock' shares in an SMA.
Substitution When an investor substitutes an individual security with another ASX listed security, cash, or pro-rates across the other securities in the personal portfolio.
White-labelling Also called 'badging'. When a party, independent to the SMA provider or responsible entity (such as a dealer group, accountant or broker) badges the SMA service as their own service (eg. the third party can choose their own name for their service, the model portfolios they wish to offer, and fee structure)

Source: This glossary is compiled from definitions provided by the Australian Securities Exchange (ASX), Australian Securities and Investments Commission (ASIC), IMAP, BlackRock and published by Financial Standard.

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