Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Managed accounts exceed $111 billion
The Institute of Managed Account Professionals (IMAP) has announced funds under management (FUM) in the Managed Accounts space has hit $111 billion on 30 June 2021. That’s a rise of $15.6 billion over the last six months, or 16.4 per cent.
IMAP, in conjunction with actuarial firm Milliman, has released six-monthly data on managed accounts, which it says have gained popularity during the pandemic as a way for financial advisers to manage client accounts with greater efficiency and greater access to multi-asset or multi-managed portfolios, in a convenient package.
The growth of managed accounts is expected to continue over the next few years as IFAs tackle business challenges such as optimising client outcomes, investment performance, practice efficiency, service differentiation, and reducing operational risk.
A stark reduction in compliance issues and red tape has also caused a rise in the uptake of managed accounts. According to research firm Investment Trends, recommendations from financial advisers to use managed accounts over the last five years have doubled to 44% thanks to the product’s ability to lessen compliance problems. To go a step further, the research house also found that a further 26% of advisers were considering recommending managed accounts to their clients and that the COVID-19 pandemic had accelerated adoption.
Toby Potter, chair of IMAP, said in an announcement “the significance is not just that managed accounts have now been used by advisers for 24-plus years, but that in the past five years alone the value of clients’ investment advised through managed accounts has increased by $80 billion. We can remain confident that the managed accounts advice and investment sector is contributing strongly to wealth management of Australians of all ages.”
The sector however has been under pressure from many combined factors. Potter says challenges have included “market conditions, regulatory reform, restructuring of the adviser market and continued consolidation through acquisitions, advisers moving between licensees, competition to justify fees and striving for consistent investment performance from investment managers.”
The FUM results split between types of managed accounts is as follows:
Looking at the table above, the big increase in managed accounts occurred in the separately managed account (SMA) and managed investment scheme (MIS) space, which rose by $23.03 billion in one year, a phenomenal rise of 82 per cent. Trailing closely behind were managed discretionary accounts (MDAs), which rose by $12.73 billion, or a 36 per cent rise.
In total, managed accounts total $111.01 billion in size, up 39 per cent in the year.
