The initial market response to the COVID-19 pandemic certainly put managed accounts to the test. Execution speed and efficiency became essential. Many investment managers who quickly made strategic moves across their managed account portfolios saw positive outcomes – and with markets recovering relatively fast, swift rebalancing has also added significant value over time.
At the same time, the managed account ecosystem pulled together as one: asset consultants and fund managers worked together to provide client communication, including webinars and podcasts, to support advisers and reassure investors.
I recently spoke with three leading asset consultants at Macquarie Wrap’s SMA Fund Manager about our collective learnings from this unique year – and how they expect managed accounts to evolve in the future.
Reimagining the adviser investment model
Managed accounts have become increasingly popular in recent years, however in 2020 their benefits really came through the fore – allowing advisers to respond to fast-moving market shifts, and improving access to advice.
Unsurprisingly, the strong LONSER headwinds of 2020 saw record flows to Macquarie’s managed accounts solutions. We now have over $5 billion in funds under management across more than 239 Separately Managed Account (SMA) models with more than 50 managers.
So as we look to 2021 and beyond, we believe managed accounts will continue to take rapid market share, and partnering with asset consultants and investment managers will become increasingly important. Advisers have had time to take stock of their business in the last couple of years. After several years of vertical disintegration as well as the recent market volatility of 2020, many are now choosing to focus on their core expertise in advice – rather than portfolio management.
As Steven Jessop, Head of Licensee and IFA Sales with Lonsec, said during the panel discussion, “Advisers are in a position where nearly a third of their competitors have exited, and if they get their business structured efficiently they can grow exponentially over the next few years. That’s partly why we’ve seen them embrace managed accounts over the last nine months and expect them to continue to do so.”
Outsourcing managed account decisions to an asset consultant is one option for advisers. Others may draw on the investment expertise of an asset consultant to supplement their own capabilities – or ask them to sit on their investment committee to provide independent rigour.
Fund managers have also recognised managed accounts can be a complimentary offering to their business. And while they may compete with asset consultants, they also provide services or work closely with them.
These factors, along with the demonstrated value managed accounts added to portfolios during the volatility of 2020, have served to strengthen and expand the managed account ecosystem.
Angela Ashton, Founder and Director of Evergreen Consultants, said COVID-19 strengthened the trust advisers place in her business. “They are happier now to defer decisions to us, because we proved our IP during the crisis. The functionality of managed accounts really came to the fore during March and April 2020, at the height of the market turbulence – the ability to move funds in and out was something advisers never could have done at that scale before.”