Financial planners can now access a new separately managed account (SMA) service with no set minimum investment and fees starting from as low as 55bps.
Originally set for a release earlier this year the SMA was finally launched yesterday by Merrill Lynch Investment Management (MLIM) in conjunction with Praemium Portfolio Services The new product has an average administration and investment fee of less than 1 per cent (before performance fees), considerably less than most master fund and wrap platforms which can charge up to 3 per cent for the same services. Praemium has already gained considerable traction in the financial planning and accountancy world with its ‘virtual wrap’ product, which charges a flat rate for admin, rather than the normal percentage of funds under management. At present, investors in the SMA have access to seven model portfolios from two providers, MLIM and Aegis Equity Research, but that will “eventually be extended to over 50 models on the system”, Maurice O’Shannassy, MLIM managing director, said. Already five groups have agreed to badge the service including dealer group Lonsdale plus Epic, Tolhurst Noall, DJ Carmichael and PKF. Dealers using the service also have the option of constructing their own model portfolios, provided they satisfy requirements set by MLIM. “We are the RE so they’ll have to go through our due diligence to demonstrate they have the ability to manage money,” O’Shannassy said. He denied the launch of the MLIM Customised Portfolio Service was an attempt to re-gain flows into the group’s flagship Australian Shares Fund, which suffered severe outflows during 2001-2004 on the back of poor performance. Having said that, performance has turned around considerably as MLIM’s growth-orientated style has come back into favour. For the year to September 30, 2005, the MLIM Core Australian Shares Fund returned 36.6 per cent, according to Intech, against the median manager, which returned 34.12 per cent. Despite disappointing support for SMA-type products in Australia in the past, O’Shannassy said the new customised portfolio service would be successful because of its pricing and functionality. He also believed the timing was right because markets have been performing strongly. He said the low fees are possible because of the product’s tax-effective structure and savings in trade execution. MLIM also acts as the custodian.
A managed investment scheme holding 20 per cent or more in unlisted assets is deemed an illiquid scheme and is restricted from providing frequent liquidity, but there is no formal limit on how much super funds can allocate to these asset classes. The Conexus Institute writes this is a special privilege given to APRA-regulated super funds that should not be taken for granted.
David Bell and Geoff WarrenFebruary 6, 2025