Investors’ demand for tax-efficient investing is fueling rapid growth in separately managed accounts (SMAs), which now top $500 billion in tax-managed assets—up 67% since 2022. Unlike mutual funds or ETFs, SMAs allow investors to directly own securities, enabling personalized tax management such as loss harvesting. 

Direct indexing remains the most popular strategy, but providers are expanding into active equity and fixed-income SMAs to capture additional tax alpha. Challenges arise with active managers, since balancing loss harvesting with stock-picking discipline can dilute investment ideas, though new approaches like substitute stock lists aim to resolve that. 

Fixed-income SMAs offer fewer opportunities, but rising rates in recent years did create harvesting potential, while model portfolios are also integrating tax-aware transitions to ease client moves without triggering large gains. 

Finsum: Overall, tax-managed SMAs are expanding across asset classes and portfolio models, giving advisors more tools to reduce investors’ tax burdens.