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SMA
Præmium has developed a proprietary state of the art technology for operating a Separately Managed Account (SMA) service. Currently, in Australia, this technology is only used in SMAs that are operated by BlackRock Investment Managers (Australia) Limited.
What is an SMA?
Put simply, an SMA can be thought of as a more efficient non-unitised managed fund.
When you invest in a managed fund, you are buying the fund manager’s ability to select stocks to create an investment model. However, you pay for a lot more than just their intellectual property. You also pay for unit administration, brokerage charges and many other costs. In an SMA, some of these costs are eliminated and many others are reduced. The result is that an SMA is cheaper than the traditional managed fund.
In relation to wrap platforms, the SMA removes a further layer of custody service and fee associated, effectively reducing the cost of investing.
Another significant advantage of the SMA over a traditional managed fund is greater transparency of the underlying assets. The investor will be able to see exactly what shares they own, thus enriching their investment experience. As beneficial ownership rests with the investor, portability is an inherent feature of the SMA, enabling in-specie transfers in and out of the SMA.
To further improve tax efficiency, SMAs also remove embedded CGT liabilities from the portfolio and enable the investor to select the most favourable tax parcels from within, or outside, the SMA for disposal.
Præmium’s SMA technology enables significant customisation of client portfolios. For example, the SMA offers the ability to load and lock stocks external to the model, freeze tax parcels to minimise future CGT liabilities, place minimums on rebalancing trades to reduce trading activity.
History of the SMA
SMAs have long been popular investment vehicles in the United States as a premium proposition delivering benefits of tax-efficient customised portfolio management with significantly reduced minimum investment levels. SMAs have now reached mainstream levels in the US where retail SMA assets reportedly grew from $185 billion in 1996 to $678 billion in 2006 (Financial Research Corp).
In November 2005, Præmium entered into an exclusive agreement with BlackRock Investment Managers (Australia) Limited (formerly known as Merrill Lynch Investment Managers Limited, MLIM) to deliver an SMA to market utilising Præmium’s proprietary technology. The service is known as the Merrill Lynch Customised Portfolio Service. This product has been received well by the market, winning the Rainmaker Marketing Excellence Awards 2006 "Best Innovation of the Year 2006".
Præmium is now in the process of bringing its own SMA offering utilising this technology (to be known as SMArtFUND) to the United Kingdom.
General reading
| Document Title | Date | Type | Size |
|---|---|---|---|
|
Financial Standard Guide to Managed Accounts If you would like to receive a hard copy of the guide in the post, click here and send us your postal address |
August 2007 |  |
2 MB |
|
The Benefits of Managed Accounts, Published by IFA Education, Australia
|
April 2006 | |
180 KB |
|
Waiting for THE NEXT BIG THING |
Spring 2005 | |
15 KB |
| September 2004 | |
56 KB | |
|
Alternative Methods of Delivering Investment Outcomes for Clients Article by Paul Resnik Gives some background and a very good insight into the SMA model in the US, how they work and the tax issues surrounding SMAs, and the limited Australian experience to date. As this article dates back about 3 years it does not take account of the latest technology developed by Præmium, such as the open architecture that facilitates access to portfolio models from diverse origins, the ability to blend portfolio models, and the flexible payment structure that the Præmium technology allows. Read the article in full at www.winstonprivate.com.au/technical.html |
August 2004 | |
26 KB |
Who do we offer the SMA to?
Præmium’s Separately Managed Account technology is currently exclusively available through BlackRock.
To find out more, contact BlackRock Adviser Services Centre on 1300 366 101.