Tuesday, 07 November 2023 02:50

SMAs Outpacing Mutual Funds Among Wealthy Clients

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According to a report conducted by Hearts & Wallets, high net worth (HNW) investors are favoring separately managed accounts (SMA) over mutual funds. The report surveyed 6,000 people. About 22% of US households were invested in an SMA, which is a significant gain from 13% in 2020. In the same timeframe, mutual fund ownership increased from 38% to 39%. 


Among HNW investors with investable assets of $3 million or more, SMA ownership went from 22% in 2020 to 41% in 2022. In terms of portfolio allocation, SMAs climbed from 22% in 2020 to 29% last year. 


At one time, mutual funds were the only way for retail investors to get access to many markets and the expertise of portfolio managers. Now, there are a multitude of products that offer these features, often with more liquidity and lower costs. 


One reason for the growing popularity of SMAs is that they are becoming more affordable and now require lower account minimums. Another factor is the growing interest in personalized investing which is more easily facilitated with SMAs rather than mutual funds. For instance, an investor passionate about protecting the environment could avoid fossil fuel companies in their holdings. 

Finsum: Separately managed accounts are gaining traction among high-net-worth investors and are displacing mutual funds.


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