Powerwrap to modernise SMA market

Powerwrap is working on a new SMA concept.


By Sarah Kendell

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Investment platform Powerwrap is currently working on a new separately managed account (SMA) structure that would bring portfolio manager performance closer into line with that of a managed fund.

In an interview with financialobserver, Powerwrap chief executive Cormac Heffernan said the group was looking to eliminate some of the barriers preventing model portfolio managers from investing in areas such as small-cap stocks, which had traditionally been the preserve of large-scale managed funds.

“We’re interested in redesigning the way an SMA works, to make it easier for model managers to be able to invest in the more boutique or small-cap space,” Heffernan said.

“There have been some limitations to SMAs in that regard and we’ve always been able to argue that the limitations have been outweighed by the benefits that you get from an SMA, but wouldn’t it be great if there weren’t any limitations?”

Commenting on yesterday’s announcement that Powerwrap had added a new Australian real estate investment trust SMA managed by Folkestone, he said the platform had a unique open-door policy when it came to the product choices offered to advisers.

“We pride ourselves on being a really open platform with our managed accounts,” he said.

“Often by the time the retail investor gets access to a fund, they have missed out on the peak of the performance cycle because the manager has had to go through the process of developing an investment track record, getting a research rating and passing a platform’s internal approval processes.

“As an innovative company we’re able to move quickly – we don’t make any judgments about quality, we just make sure the manager is compliant and allow the advisers to make the decision on whether they are a good manager or not, which is the right place for the decision to be made.”

Looking ahead, he said he expected demand for international equities exposure to be a key driving force in the continued growth of SMAs this year.

“There’s an increasing demand from clients for international stocks – if you think of companies like Apple and Facebook, these are brands that people use every day and they want to buy them,” he said.

“At the same time, it’s almost impossible for a broker to cover all the ASX stocks, let alone all the stocks in the world.

“We see the trend for international SMAs being quite big this year, as advisers and brokers embrace being able to buy into an investment strategy in an SMA and still having all the benefits of keeping direct stock.”

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