Model portfolio growth continues

Published on
July 3, 2020
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Model portfolio growth continues

Australia's model portfolio landscape is continuing to grow at a rapid rate, with the number of models available on managed accounts growing by 70% p.a., according to Rainmaker Information.

Model portfolios are purpose-built investment choices that hold direct equities, Exchange Traded Funds (ETFs), debt securities or unit holdings in traditional managed funds.

Over the last four years, the number of model portfolios on offer has increased from 865 to 4,129 according to Rainmaker'smanaged account research.

At the same time, managed accounts are also experiencing significant growth, with funds under administration increasing by44% in 2019.

Rainmaker reports managed accounts hold an aggregate $65 billionas at the end of March 2020.

To put this significant growth in perspective, the wider platform market (including managed accounts) grew by 7% in 2019.

A review of almost 100 separately managed account (SMA) platforms revealed that there are 1,003 discrete model portfolios offered by 193 investment managers, research houses and financial advice groups.

These models are available across four managed accounts on average, create 4,129 points of presence in the market.

"Model portfolios are offered by investment managers or intermediary groups such as research houses, consultants, platforms themselves and financial advice groups," said Alex Dunnin, executive director of research at Rainmaker.

"Of the 1,003 unique models, 12% are ETF or indexed based, but the big surprise is that only 2% have been identified as being explicity ESG (environmental, social and governance) based."

"We should expect this number to increase given the market's push for ESG products that is currently underway for managed funds and superannuation products."

Rainmaker found that 41% of managed account models are in equities asset sectors, 49% in diversified offerings and 10% in other asset classes such as property, bonds and alternatives.

The providers offering the most models portfolios through managed accounts are:

Offered by research houses: Morningstar
Offered by investment managers: Macquarie Investment Management
Elston Asset Management
iShares by BlackRock

Additional managed accounts research from Rainmaker's AdvantageReport identified that there are 36 consumer facing brands offering 76 managed accounts platforms in Australia.

Model portfolio and managed account research
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