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Forward Thinking Magazine : December 2010
7 Need to know cover story The lexicon of managed accounts Individually Managed Account (IMA) An IMA is a managed account constructed and managed by an investment professional (typically a financial adviser or stockbroker) based on the needs of each specific investor. Effectively, an IMA represents a bespoke investment portfolio tailored for and managed in the context of the needs of each individual investor. Separately Managed Account (SMA) A SMA is a managed account where a professional investment manager constructs a model portfolio of underlying investments and makes this available to a group of investors. The model is managed according to the manager’s pre-determined investment strategy and objective for that particular SMA and investment decisions are taken at the model level, rather than the individual investor level. The ability to tailor the investment allocation within the SMA model at a client level may or may not be offered; if offered, this is typically limited to the ability to exclude specific investments included in the SMA model from the client’s actual portfolio. Unified Managed Account (UMA) A UMA is a managed account that enables a number of different SMAs and other investment types, including managed funds and alternative investments such as hedge funds, to be packaged and managed within a single account. A UMA relies on an overlay manager to construct and manage the portfolio of different investments on behalf of investors. Managed Discretionary Account (MDA)) An MDA represents a licensing option that enables a licensed dealer (such as a financial adviser or stock broker) to: hold client’s funds in trust for that client; and make investments using the funds in the account at the dealer’s discretion without prior reference to, or approval by, the client. MDAs are used in conjunction with other managed account structures and can be used to support administration through a Wrap account. Managed accounts are increasingly becoming part of the solutions toolkit offered by financial advisers to their clients. Yet the landscape can seem confusing, given managed accounts come in different flavours. Though there is no standard definition of the various types, the following descriptions aim to capture the unique elements and key points of difference between different managed accounts.