Jonathan Bayes

Chief Investment Officer, Prime

To be very honest, we are reasonably comfortable with our managed account offering. Prime manage four strategies: Aussie equity, international equity, diversified income and defensive income.

Within the constraints of our SMAs, we have the ability to raise cash as high as 15 per cent and to hold managed funds alongside listed equities, which means that as we have tactically grown more cautious on ‘growth’ assets during Q1, we were able to raise cash and to shift some of our ‘beta’ bets into strategies seeking absolute returns.

The outlook for markets is less clear, and though we fear the downside more as the year draws on, the nearer term remains hard to call.

We don’t like the liquidity withdrawal going on at the Fed, but we acknowledge that the global and local economy are good and equity valuations are near two year lows.

Our thoughts are more towards the idea that the upside is increasingly capped, but we don’t really know when the downside plays out, even though the risks are rising. This is why we are shifting our biases where possible to absolute return funds within the ‘growth’ component of our asset base.

Strategically, where we and many advice firms struggle on the asset allocation piece with SMAs is still in the alternatives space.

Though it’s not a large part of our asset allocation, it is still relevant, and so we are yet to determine how or if we will offer an SMA exposure to commodity-trading-advisor (CTA) funds, commodity or even unlisted property and infrastructure funds.

So in that respect, we are mulling things over.

Grayden Taylor

Portfolio Manager, Elston Asset Management

As a long-term provider of both Individually Managed Accounts (IMAs) and Separately Managed Accounts (SMAs) solutions, it has been easy to get frustrated by the pace of take up within the wider adviser community, compared to less customised offerings available.  

As an industry, we must continue to educate both advisers and investors on why managed accounts make sense, and clearly articulate to advisers how using managed accounts is going to help their clients.

One of the key advantages is the ability to manage portfolios based on the investor’s individual tax circumstances. This enables the value, which advisers provide through their strategic advice, to be enhanced by the ‘tax-alpha’ generated by the managed account portfolio manager through deferring or limiting tax, leaving the client better off on an after-tax basis.

Where advice businesses are making the switch from unitised vehicles to managed accounts, the preferred option to date has been to use platform SMAs as a stepping stone. Given that a focus on after-tax management is a core philosophy at Elston Asset Management, this is undoubtedly viewed as a step in the right direction.  

That said, despite steadily improving functionality from platform providers in recent years, the degree of flexibility does vary between providers and does not yet match that available from IMAs, which can be frustrating for a portfolio manager trying to maximise the client’s after-tax outcome.

No doubt, a combination of adviser demand, platform provider investment and general technology advancements will see platform SMA functionality improve further, so that advisers and investors alike can benefit fully from these compelling solutions.