More model portfolio managers

The number of asset managers participating in model portfolio programs has doubled over the past four years.
NOV 27, 2007
The number of asset managers participating in model portfolio programs has doubled over the past four years, rising from 90 to 214, according to “The State of Model Portfolio Programs,” a study from the Money Management Institute and Dover Financial Research LLC. The study found that model UMA programs represented $78.4 billion in assets under management, or 61.5%, of total Unified Managed Account/Multiple Disciplined Portfolio assets, Smaller asset management firms — with less than $10 billion in assets — dominate the model portfolio market segment representing 52% of total model managers. Model portfolio programs are advisory programs in which an asset manager hands over its investment model to an overlay manager—which could be providers of major distributors such as brokerage firms or banks. In these programs, the asset manager is often no longer involved in the implementation of its model or the management of the underlying assets. “In some way, managers’ enthusiasm for Model Portfolio Programs may seem counterintuitive, as this changes both their relationship with investors and fee structure,” said Christopher L. Davis, president of MMI said, according to a press release. “However, the data suggests there are broad advantages for the investor, and ultimately that is what is going to drive the market.” Based on projections by sponsor firms, the model portfolio marketplace will have ballooned to $385 billion in assets, or 48.8% of the total SMA advisory market.

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