A new managed accounts entrant arrives with a focus on implementation

Managed accounts stopped being a niche some time ago. Funds under management reached $292.9 billion at the end of December, according to the IMAP Milliman, a rise of 25.8 per cent over the year. Growth on that scale keeps drawing new entrants, and the latest is Pacific Portfolio Solutions (PPS), which has named Kyle Lidbury as its chief investment officer.

Lidbury joins from Perpetual, with more than two decades in investment research and portfolio management behind him. He holds a Bachelor of Accounting from the University of Technology Sydney and is a CFA and CAIA charterholder.

In a newly created role, he will lead the Australia-based investment team, with responsibility for managed account portfolio construction, asset allocation and adviser investment communications, working inside a single investment team that spans Sydney and London.

PPS is the Australian related body corporate of Pacific Asset Management (PAM), the London manager founded in 2016 and now wholly owned by Pinnacle Investment Management Group.

PAM says it is responsible for more than US$25.2 billion at 31 August across its model portfolio solutions and single-manager platform, with its models available on the major UK adviser platforms. Its single-manager strategies span equities, global listed infrastructure, liquid alternatives and global credit. Pinnacle reported A$229.6 billion under management at 30 June across 18 affiliates and PAM.

The offering

The first product is the Pinnacle SMA Range, six portfolios covering Moderate, Balanced, Income, Growth, High Growth and Listed Growth, built from Pinnacle Affiliates’ actively managed strategies. The Pacific Core Range, PAM’s flagship UK model portfolio offering, is expected to follow within months, which will give advisers two quite different starting points, one drawing on a single group’s managers and one built on PAM’s own multi-asset process.

“We’re bringing something distinctive to Australian managed accounts with PAM’s proven multi-asset process and implementation technology,” says Matt Lamb, chief executive of Pacific Asset Management.

Lamb argues that sitting inside Pinnacle lets the team draw on “the breadth of expertise across the Group’s high-quality affiliated fund managers”.

Implementation

Lidbury’s own argument is about the plumbing rather than the portfolios.

“Pacific combines specialist investment expertise with modern technology, enabling us to implement investment decisions and adjust portfolio positioning with a level of efficiency and flexibility I have not previously seen in the Australian market.”

That is where managed accounts either earn or lose the advantage they promise. The gap between a decision and its arrival in every client account, the handling of tax parcels on a rotation, and the cash sitting idle in between all show up in client returns rather than in a fact sheet.

An investment team that can move quickly across thousands of accounts is worth more to an advice business than another marginal difference in the strategic asset allocation.

The selection universe is the other half of the equation. An opening range assembled from one group’s affiliates is a narrower starting point than an open menu, and it is conceivable that it will stand or fall on how those strategies perform together through a full cycle rather than on the breadth of the list.

The adviser test

David Wright, head of managed accounts at Pinnacle and a co-founder of research house Zenith Investment Partners, frames the appointment around communication as much as portfolio construction.

“He combines his portfolio construction and asset allocation experience with an ability to explain investment decisions clearly and communicate what they mean for client portfolios,” Wright says.

Advisers who outsource portfolio construction keep the client conversation, and the value of a managed account depends heavily on how well the manager equips them for it in a quarter when returns disappoint.

PPS was established this year, so it arrives without a local track record and with a UK parent whose model portfolio business has grown quickly on another set of platforms.

Advisers weighing the range will be assessing the process, the technology behind it and the people running both, which is the same test every managed account provider eventually has to pass.