The line between wealth management and fund management continues to blur for the alternative asset managers who serve the high-net-worth (HNW) investor community.Driven by a growing desire on the part of these investors to maximize control over their investment portfolio, managers who are emerging or who operate with assets under management under the $1bn level are finding increased demand for separately managed accounts, or SMAs. Some of the obvious advantages of SMAs over funds from a client's perspectiveinclude customization, transparency, tax and cash efficiency, and professional management. Clients are also attracted to individual accounts when these provide flexibility in terms and fees. Two steps forward beats standing in place

The generalized shift towards solutions providing more investor control across both traditional and alternative investments is in large part due to a greater desire for products addressing global uncertainty and volatility risks,a longer-term investment perspective, and capital preservation combined with income. And yet, some managers have been slow to embrace the option of SMAs, as they perceive them to be counter-productive to growing their fledgling funds.

A more constructive view for managers might be to consider a tandem build out of both SMAs for their clients alongside their fund's asset gathering, to provide a growing pool of assets under management (AuM). It is no secret that building a successful alternative fund takes years to accomplish in thisvery competitive market.Managers who truly offer attractive investment management skill can often win over new clients through SMAs in a shorter time frame than they can for their funds, and gain fee income to sustain their business for the long term. Discretionary is the better part of valor

The preference trend of HNW investors towards SMAs is corroborated by the advisors and professionals who serve this segment. Over the past two month......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.