Honoring SMA Managers Who Shine in Rainy and Sunny Times (www.futurityfirst.com)


When advisors outsource their investment management, the strategists they want to employ should post healthy performance numbers. More important, however, is that they can clearly articulate the strategy that yields that performance and then can repeat that strategy regardless of how the overall market or sectors or subsectors within the market are performing.

This will be the 11th year that Investment Advisor has partnered with Envestnet | PMC to research and honor investment strategists working in the separately managed account space with the Seperately Managed Account Managers of the Year awards. The process begins with a look at SMA managers in the standard categories that have been consistent since the first awards were given in 2004: U.S. equity large cap; U.S. equity small-, mid- and SMID-cap; fixed income; global or international equity and a specialty category whose candidates differ each year much as the market’s top and bottom performs differ from year to year.

For the first time in the awards program, we are adding two new categories of winners, reflecting trends in the SMA industry which themselves reflect trends among advisors and their end clients. The Impact award winner recognizes a portfolio manager who has achieved sustained success in impact investing—the notion that an investor’s investment portfolio should reflect their personal beliefs and preferences, whether it concerns corporate governance, sustainable investing or other social or religious beliefs. Since model portfolios are attracting so much attention from advisors and their clients as opposed to traditional SMAs where the manager builds a portfolio for each investor one security at a time, we also thought it appropriate to name a Strategist of the Year.

Finally, from among the individual winners the awards committee chooses an overall SMA Manager of the Year, which can be considered as a first among equals who nevertheless is worthy of particular honors.

So why care about SMAs? Why honor managers in this space? First, there’s the size of the overall market, and the growing involvement of non-wirehouse advisors in the space. Tim Clift, CIO of Envestnet | PMC (which includes the intellectual capital of researchers from the former Prima Capital, which Envestnet acquired), says that by Cerulli’s reckoning, as of year-end 2014 there was $838 billion invested in some form of SMA, or about 20% of the $4 trillion invested in managed money. While Clift notes that there’s been a decline in overall in SMA assets since 2008, when SMAs accounted for 35% of all managed money, over that same time there’s been a big shift toward model SMAs.

Rather than traditional SMAs where the portfolio manager “opens the account, then trades it, targeted at the HNW client who owns individual stocks and bonds,” Clift says, now “the managers are providing their intellectual capital to a platform.” It’s advisors, Clift points out, who “are using the platform, so they need to know the [end] customer,” and are thus “responsible for risk profiling them and making changes when necessary.”

This has resulted in model SMAs delivered often through a unified managed account (UMA), which now comprises 11% of the assets in the SMA universe, up from 4% over the last seven years, Clift says. “The UMA business is $138 billion,” he says, making it “one of the fastest growing areas” in separately managed accounts. So if model portfolios in UMAs are increasingly the wrapper for SMAs, what are the traits of SMAs that make them appealing to advisors and their clients? Is it portfolio transparency or tax efficiency or the ability to customize the portfolio to individual client’s needs and preferences.

“It’s all of the above,” says Clift, but “probably the number one is tax efficiency.” That’s because the client owns individually the underlying shares or securities in the account, “so it’s much more efficient to conduct tax loss harvesting,” he says. “Second would be that customization,” so an advisor or manager can “work the portfolio” to accommodate an existing high-basis position in the portfolio, or a client’s interest in “socially responsible investing, for example; which “ties into the Impact award” being launched this year. “There’s more interest in doing good while doing well in the markets,” Clift says, and while not wanting to stereotype, he says that kind of impact investing strategy is particularly strong among women.

So where do the assets flow in SMAs? “Municipal bonds have the most assets,” Clift says, reflecting the importance of tax-aware investing among SMA end-clients and the ability to “take advantage of residency” among state-specific muni bonds. The second most popular would be large cap strategies in general, especially among the “higher yield, higher dividend” portfolio strategies, where income is important.” But the biggest growth, Clift says, is in “all-cap, multi-discipline strategies,” where managers are less constrained by needing to hew to a benchmark, and thus “not forcing them into a box.” Here are the finalists, in alphabetical order, for the 2015 Envestnet/Investment Advisor SMA Managers of the Year:

Award Category
U.S. Equity Large Cap (two awards)
Alley Company – Dividend Portfolio
Dana Investment Advisors – Large Cap Equity
Golden Capital Management – Large Cap Core
Raub Brock Capital Management – Dividend Growth
U.S. Equity Small or Mid Cap (two awards)
Chartwell Investment Partners – Small Cap Value
Congress Asset Management – Mid Cap Growth
Kayne Anderson Rudnick – Small Cap Core
PNC Capital Advisors – Small Cap Portfolio
International or Global Equity (one award)
Epoch Investment Partners – Global Equity Shareholder Yield
Harding Loevner – Global Equity ADR
Fixed Income (one award)
GW&K Investment Management – Enhanced Core Bond
Reinhart Partners – Active Intermediate Fixed Income
Specialty (one award)
Cornerstone Real Estate Advisers – US REIT
Cushing Asset Management – Cushing MLP Core Strategy
Strategist (one award)
Frontier Asset Management
S&P Investment Advisory Services
Impact (one award)
Dana Investment Advisors – Socially Responsible Equity
Breckinridge Capital Advisors –  Intermediate-Term Tax-Efficient Sustainable Bond Strategy
Manager of the Year (one award)

All of the winners in each category are finalists for this award

The winners of the 11th annual SMA Managers of the Year awards will be revealed on May 7 in a ceremony during the Envestnet Advisor Summit in Chicago. Look for onsite reporting inInvestment Advisor magazine and ThinkAdvisor on the winners, a free webinar in June with two of the winning managers, and additional content in text and in video on the winners and the process.

Green, James. “Honoring SMA Managers Who Shine in Rainy and Sunny Times.” Web log post. Thinkadvisor. N.p., n.d. Web. 23 Apr. 2015.

FFIG grow your practice

For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director  at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.

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Thomas Bugbee

Futurity First Insurance Group

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