Managed account assets dropped 7% this year

Managed accounts industry assets fell by 7% during the first three months of the year to $1.2 trillion, according to the Money Management Institute in Washington. Of the $87 billion decline in assets, $24.8 billion was attributed to investment redemptions, the lion’s share of which came out of single-strategy separately managed accounts. “We believe the assets coming out of separate accounts are either moving into more flexible programs or it is being used to pay down debt,” said Jean Sullivan, principal of Dover Financial Research, a Boston consulting firm that compiles data for the MMI. At $421 billion, separately managed accounts represent the largest of five subcategories making up the overall managed account solutions industry. The category assets declined by 11.5% during the first quarter from $476 billion. Mutual fund advisory — or wrap programs — the second largest category, saw assets fall by 7% to $322 billion during the quarter. Of the category’s $24 billion decline, $8 billion is attributed to redemptions. Rep-as-adviser, which is a client-directed brokerage account, grew by $500 million to $218.4 billion, and had $1.3 billion worth of inflows. Rep-as-portfolio manager, an adviser directed account, finished the quarter at $179.7 billion, down $1.8 billion or less than 1%. The category had $200 million worth of net inflows. Assets in unified managed account programs, which combine multiple investments on a single platform, fell by $1.4 billion or 3% to $44.1 billion, and had $400 million in net inflows. According to Ms. Sullivan, the outflows from separately managed accounts reflect what was happening across the money management industry during the first quarter when money was moving out of equity strategies and into cash and conservative fixed-income strategies. Assets in long-term equity mutual funds, for example, declined 10% or $260 billion to $2.4 trillion, and had $29 billion in net outflows. Separately managed accounts tend to represent a lot of concentrated single-strategy stock portfolios that are becoming less attractive as investors become more risk averse, she said. “Many separate account strategies do not accommodate cash, and they might be too concentrated for this [current] market,” she added.