In a Separately Managed Account (SMA) the individual investor owns the invested assets directly in his/her name. Like the name suggest, accounts are separately managed by a licensed portfolio manager on a discretionary basis. Until recently, minimum investment requirements of $1 million placed the services of these money managers well out of reach of the average investor.
HAHN’s proprietary SMA portfolio management software brings institutional advantages to individual clients. Individual account minimums for our Core and Income Focus portfolios are $100,000.
Some of the tax benefits that the ownership structure of a Separately Managed Account (SMA) provides in comparison to a similarly-invested mutual fund are detailed below.
Some of the benefits of Separately Managed Accounts:
Individual Cost Base
While mutual and pooled funds can have some notable diversification attributes, the structure of these pooled investments means that you also share the tax base of the people in the pool. This can lead to unexpected taxes being triggered, regardless whether the fund value has gone up or down since an investor acquired it.
In separately managed accounts, your cost base is just that – your own. Therefore you will know and can plan for taxable events when you have a separately managed account.
In Canada, where fees are charged to a non-registered separately managed account, the fees can be deducted from any source of income. In the case of high-income earners this can reduce the net cost by almost 50%!
No two investors are exactly the same. Most have different expectations of return, the risk they are prepared to assume and even the amount of cash flow they may require from their portfolio. A separately managed account by definition allows them to have each of these factors set to meet their own expectations.
Most of us want to know what our return has been on investments in order to see if the results will lead to our individual goals. A separately managed account shows the precise return on investments because it is your Separately Managed Account.