SMAs dominating the managed accounts market

Published on
December 20, 2022
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SMAs dominating the managed accounts market

Separately Managed Accounts’ footprint in the managed account sector has jumped from one-third to one-half in just two years, according to research from Rainmaker Information.

In dollar terms, funds under advice (FUA) in SMAs in the past two years increased 151%, compared to FUA in Managed Discretionary Accounts (MDAs) that increased only 44%.

As a result of this three to one growth ratio, SMAs’ segment share jumped from 36% to its current 52% level.

“SMAs are growing three times faster than MDAs,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

“The explosion in the use of SMAs was first seen in the second half of 2020, and the growth rate is widening.”

Managed accounts FUA growth: 2016 - 2022

Managed accounts may be split broadly into three types: SMAs, MDAs and other Investor Directed Portfolio Services (IDPSs) or IDPS-like investment schemes.

“Managed account separately managed portfolios are growing more rapidly because they are easier for financial advisers and investment managers to work with than managed discretionary accounts which can require special extra licensing,” said Dunnin.

“SMAs are also more scalable and easier to explain to investor clients, meaning they can engage with them more easily.”

“Explosive growth in managed accounts combined with sustained financial adviser market compression suggests this trend of SMA dominance will continue.”

The rapid growth of SMAs is fuelling the rise of managed accounts holistically as an investment vehicle, which is now on track to become the preferred type of investment platform in Australia.

Managed accounts FUA reached $163 billion as at 30 June 2022.

Managed accounts FUA has grown 46% pa over the past five years, non-managed account platforms have grown only 1% pa. See previous research titled ‘Managed accounts lifting up platform market’.

“Managed accounts are the main non-superannuation wrap investment vehicle, their growth means they have subsumed this sector, now being 85% of it.”

“They are also the only segment of the platform market showing long-run growth.”

“Managed accounts are growing rapidly while other platform segments such as regular retail personal and corporate superannuation and retirement platforms are being constrained by the widespread disruption and heightened competition that the platform market is experiencing,” said Dunnin.

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