What is an Individually Managed Account (IMA)?
An Individually Managed Account (IMA) is an investment structure that enables investors to delegate the day-to-day investment decisions and management of their portfolio to a professional portfolio manager, while retaining full ownership of the assets. The IMA is customised to the investor’s specific needs, goals, and risk tolerance, allowing for a more tailored approach to investment management compared to a traditional managed fund.
What is a Separately Managed Account (SMA)?
A Separately Managed Account (SMA) is an investment portfolio managed by a professional on an investor’s behalf, but the investor retains direct ownership of the assets. This differs from traditional managed funds where the investor owns units in a pooled investment.
What are the benefits of an IMA vs an SMA?
Customisation
IMAs can be highly customised, with advisers able to tailor each client’s portfolio to suit their individual requirements, risk tolerance, tax situation, and investment objectives. SMAs, on the other hand, use a pre-defined model portfolio, and all investors within that SMA structure generally have the same portfolio.
Flexibility
IMAs offer more flexibility, allowing for unique investment strategies and adjustments based on the investor’s specific needs. SMAs have less flexibility, as the portfolio is based on the model.
Client Choice
IMA investors have more say in how their money is invested and have more control over their portfolio. SMAs provide less control, as investors generally have less say in the model portfolio.
What is a Managed Discretionary Account (MDA)?
A MDA is an investment portfolio management service where investors can provide discretion to an investment manager to manage their portfolio on their behalf in accordance with their instructions, investment objectives and an agreed investment program.
Entering into a Managed Discretionary Account contract eliminates the need to constantly obtain an investor’s agreement or instructions to sell, buy, apply for, or redeem investments in financial products.
MDAs are regulated by the Australian Securities & Investments Commission (ASIC) and the provision of MDA services must meet certain conditions of the Corporations Act 2001, Regulatory Guide 179 and the ASIC Corporations (Managed Discretionary Accounts) Instrument 2016/968. MDAs are managed by a Managed Account Operator that must hold an Australian Financial Services License authorising them to provide MDA services.
What is Dynamic Asset Allocation (DAA)?
Asset classes from time to time become cheap or expensive relative to their underlying fundamental value. Dynamic Asset Allocation seeks to identify these valuation anomalies, and to adjust portfolios to favour what looks cheap and to reduce those that are expensive. Avoiding buying when assets are overpriced is essential in long-term portfolio risk management.
What is Strategic Asset Allocation (SAA)?
Strategic asset allocation (SAA) is a long-term investment strategy where investors set target allocations for different asset classes (like stocks, bonds, and cash) and then rebalance their portfolio periodically to maintain those target allocations. Unlike Dynamic Asset Allocation, SAA maintains a set allocation based on long-term forecasts.
What is an Exchange Traded Fund (ETF)?
In their simplest form, ETFs are a collection of securities designed to track the performance of a specific index. For example, you can buy shares in an ETF that tracks the performance of the S&P/ASX 50, an index that tracks the largest 50 companies listed on the Australian Stock Exchange, weighted for the size of each company.
ETFs have grown rapidly both internationally and here in Australia as investors have been attracted to their low cost, transparent, tax efficient characteristics, and there are funds that cover all asset classes and markets around the world.
What is a Wholesale Discretionary Account (WDA)?
A Wholesale Discretionary Account (WDA) is an MDA specifically offered to investors who meet the criteria of being a “wholesale client” as defined under Australian law. Wholesale clients generally have a higher investment threshold. Like with MDAs, a professional manager makes investment decisions on behalf of their clients within agreed parameters.