New product available for investors

A Separately Managed Account is an institutional investment strategy

Dear Money Lady readers,

Whether you are currently investing or just beginning, I want you to consider a product that you may not have heard of yet – one that has just opened up to the average investor in the last five years.

Most everyday investors are still choosing guided stock portfolios, exchangetraded funds (ETFs) or mutual funds. These are fine, and if you are happy with them, I would say keep going. But, if you would like to consider something different, why not use what we have been offering high-networth clients for decades?

The product is called an SMA or Separately Managed Account. This is an institutional investment strategy that, in the past, was always reserved for large pools of capital like pension funds, research or hospital foundation moneys, large corporate and private investors and even insurance pools of capital.

Essentially, what they are is a collection of stocks in different sectors, managed by a highly skilled institutional money manager with the sole purpose of ensuring downside market protection (through hedge strategies), compounded growth, and capital preservation.

Long touted as the No. 1 investment in Europe, the U.S. and Canada, SMAs have always been available only to the wealthy because a large amount of money ($500K and up) was necessary to get into the fund, or even to essentially mirror your portfolio to match an institutional money manager’s segregated portfolio.

I am glad to say that in the last five years the entry thresholds have been lowered substantially; in fact, in the last three years, they have become available in every investment sector – domestic, foreign, global, fixed income and equities.

These portfolios have fared the best in the wake of COVID-19 and most will probably provide even higher returns than the typical mutual fund or ETF that the average person chooses online or at their bank. Again, do your research, know what is out there, and be smart about investing.

Remember that the three killers to any stock portfolio are interest, fees and risk.

An SMA should ensure that you limit all three. They have some of the lowest fees in the industry, some will provide a guaranteed floor return value with growth projections, and all will limit the impact of a declining portfolio by lowering volatility. SMAs are only available through an investment dealer and will not be offered at the retail bank level. Good luck and best wishes, Christine Ibbotson

Written by Christine Ibbotson, author of three finance books and the Canadian bestselling book, How to Retire Debt Free & Wealthy. Visit www.askthemoneylady.ca or send a question to info@ askthemoneylady.ca.