Managed Accounts Solutions

Separately managed accounts (SMAs)

A long and established feature of the hedge fund world has been gaining in popularity Hedge fund investors over the last few years. 

Falcon has relationships with prime brokers that will be able to cater to those customers that are looking for SMA's structure with access to most global financial instruments: Equities, ETF’s, Fixed Income, FX, Futures and Options.

Managed accounts can be structured in a variety of ways:

Standard account: the investor appoints a single manager to invest in pre-agreed sectors or securities.

Multi-discipline account: an SMA with multiple managers, each appointed for its expertise in a particular strategy or asset class, for the account – this allows the investor to diversify their SMA portfolio beyond what a single manager could normally manage.

Managed accounts can be organised with individual investment managers or, alternatively, through a managed account platform. The platform can be run by a single manager or by a selection of managers. The manager can reduce the burden of running multiple SMAs by delegating the administrative functions to third party providers. Platforms can offer investors lower minimum subscriptions and better redemption rights than typical co-mingled fund. Platforms can also offer access to certain sectors, specialisations or strategies via separate cells or portfolios – the investor can be offered a managed account at the cell/portfolio level of the platform or, alternatively, can hold shares or interests in the platform linked to one or more cells/portfolios. 

Advantages for the investor

  • Control: the SMA investor can tailor investments and asset classes to its specific requirements rather than rely on a more broad-brush investment strategy dictated by the manager. 
  • Ownership: the investments held by an SMA are in the name of the investor, even if the manager’s mandate is terminated.
  • Management fees are often lower than in a traditional fund.
  • Transparency: the investor has direct access to information about the investments which enables them to assess the risks.
  • Withdrawal: it is easier to withdraw, therefore the investor is better able to conform investments to shifts in appetite for liquidity and risk.
  • Greater tax efficiency: Unlike a mutual fund, where capital gains are passed on to all investors, an SMA investor is only taxed on realized gains in his or her specific portfolio. Because an SMA contains individual securities, capital gains can be offset by instructing your manager to sell investments that will produce a capital loss through tax-loss harvesting.
  • Flexibility: rather than detail a strategy in advance in a private placement memorandum and be saddled with it, the manager and the investor can negotiate a strategy and refine it as and when market conditions warrant a rethink.
  • Costs: managed accounts often do not need audit or tax services; in additional legal costs are lower because the documentation is more straightforward. Cost savings are passed on to the investor.

Advantages for the manager

  • Sales: by offering a wider range of options, the manager can expand its investor base and revenue streams. A new manager can use SMAs to quickly establish a track record and win credibility with investors.
  • Accounting: obligations are less onerous compared to a traditional fund.
  • AIFMD: managed accounts are not considered an “alternative investment fund” and therefore should not fall under AIFMD, meaning lower operational costs and a lighter compliance burden (e.g. asset stripping restrictions, remuneration rules etc).
  • Reinvestment of proceeds: the manager has the prospect of retaining and growing assets under management for much longer periods.

 

Technology to Help Portfolio Managers Succeed 

  • Trading Platforms - Powerful platforms and tools for managing clients assets
  • Pre-Trade Allocations 
  • Order Types and Algos 
  • Allocations Order Tool 

Please email info@falconfundsolutions.com to schedule more detailed discussions.