Multi-asset strategies push SMAs mainstream


By Julie May

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The potential of separately managed account (SMA) model portfolios outside the equity sphere was fast being realised by the financial planning community and was the driving force behind the SMA sector becoming mainstream, the chief executive of platform provider Praemium said this week.

Speaking to financialobserver, Michael Ohanessian said SMAs would be the fastest-growing segment of the investment platform market, which was largely a consequence of the emergence of risk-weighted multi-asset strategies that were being adopted within SMAs.

Ohanessian said up until about two or three years ago, the SMA models on Praemium’s platforms effectively comprised direct equity and exchange-traded-fund models, whereas now more people were using multi-asset SMAs, which had led many advisory groups to recreate their propositions.

“Models are no longer just models of equities because that’s just one asset class,” he said, adding of the advisory groups working with Praemium, more were looking to incorporate multi-asset options.

“It’s why SMAs have gone mainstream. It has always been true that an SMA is a more effective way of buying direct equities, but when you throw in the fact you can do multi-asset strategies as well, it is far more efficient for both the adviser and the client.”

Investment Trends research, released earlier this year, also concurred that advisers were beginning to note the potential in SMAs beyond Australian equities, with almost 70 per cent of potential users saying they would like to have access to an international equity SMA, while 41 per cent wanted access to a fixed income/hybrid securities SMA, with 45 per cent interested in accessing a multi-asset SMA.

Ohanessian highlighted that Praemium’s platform operations in the United Kingdom had always encompassed multi-asset strategies and while he could not pinpoint what specifically triggered the trend in Australia, the Future of Financial Advice reforms were no doubt a contributing factor.

“If an adviser can risk profile someone, find an SMA model portfolio that matches their objectives, which is run by a professional investment manager, that is more efficient, more demonstrably compliant and where portfolio changes happen in a discretionary manner, well it’s better for the adviser and the client. And that’s why it is going mainstream,” he said.

Australia was behind the UK and United States in terms of the adoption rate of managed accounts, however, that was quickly changing, he said.

Praemium, which offers 250 model portfolios through about 50 managers, noted Australia was going through a turning point some time ago, he said, emphasising that shift had happened, and the platform market trying to adopt such offerings was proof of that.

Meanwhile last month, Praemium announced a 28 per cent increase in revenue and other income to $24.5 million as part of its 2014/15 full-year results presentation.

Further, it reported 49 per cent growth in SMA funds on platform to $3.8 billion and a net profit before tax of $1.5 million, compared to an$800,000 loss for the previous corresponding period.

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