By Cyril Tuohy
Unified managed accounts (UMAs) grew 7.7 percent in 2012, doubling their market share since 2008, as new companies entered the category and as existing companies converted platforms to a UMA model, according to the analytics firm Cerulli Associates.
UMAs are professionally managed private investment accounts that are rebalanced regularly by financial advisors and hold mutual funds, stocks, bonds or exchange-traded funds (ETFs). They are distinct from the separate accounts channel, which contains only one type of investment.
“Existing UMA programs are experiencing rapid growth,” Patrick Newcomb, senior analyst at Cerulli, said in a statement. “New entrants to the space — whether through a new program launch or platform conversion — are aiding the growth of UMAs.”
UMA assets, which made up 6.3 percent of total managed account assets in 2011, rose to 7.7 percent of total managed account assets by the end of last year, according to Cerulli’s annual report titled “Managed Accounts 2013: Moving Toward a Single-Platform Environment,” which provides a glimpse into the fee-based landscape.
UMA assets made up only 3.8 percent of total managed account assets in 2008. The managed accounts industry reached $2.8 trillion in 2012, and is expected to surpass $5 trillion in assets by 2016, Cerulli also said.
Managed account programs are typically divided into five categories: mutual fund advisory, separate account, rep-as-advisor, rep-as-portfolio manager and UMAs.
Separate account programs contained more than $619 billion in assets by the end of last year, nearly three times as much as the $213 billion in assets held in UMA programs, but separate account programs are losing share to UMA programs, the report said.
Newcomb said that more sponsor firms were launching UMAs and are giving advisors more control over their investment portfolio as UMA programs “address a variety of advisor and client needs.”
Financial advisors typically have shied away from UMA programs because UMAs are difficult to transfer to other firms when the advisor jumps to another broker-dealer since accounts may be available on one platform but not on another.
“The consensus among broker-dealer executives and asset managers is that many stand-alone separate account programs will convert into model-driven separate account programs or get rolled into existing UMA programs,” the report said.
In 2003, separate account programs dominated the managed accounts industry. They accounted for 49 percent of all managed account assets as traditional wire house advisors used them to complement brokerage accounts.
In the past 10 years, however, mutual fund advisory programs, rep-as-portfolio manager and rep-as-advisor programs displaced the brokerage relationship as a method for managing an investor’s portfolio of securities.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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