Rise of Individual Managed Accounts: What you need to know

Rise of Individual Managed Accounts: What you need to know

Recently, the industry has observed the rise of passive investing among investors, overtaking the norm of fund manager active investing. This vast uprising has seen managers try to get more ‘active’ in order to deliver best practice and more individually constructed portfolios.

Individually Managed Accounts (IMA) are an investment structure option for investors who seek to take advantage of their tax position. IMA’s are able to deliver transparency by utilizing a portfolio manager to focus on after-tax returns as they take into account the investors capital gain and loss positions, incorporating tax implications on each stock and the overall portfolio for the client. Unlike managed funds, assets are beneficially owned by the investor, and are not grouped with those of other investors. An IMA combines the benefits of professional money management, with the flexible control and tax advantages of owning an individual portfolio.

This strategy deviates from the managed fund and direct share model portfolios. This investment philosophy ensures the portfolio takes over or under-weight positions in asset classes or sectors relative to the position of the model portfolio. Allowing the ability to put more weight in asset classes or sectors with stronger growth and return potentional, thus helping to improve risk-adjusted returns.

IMA are designed to be region, sector and style neutral, however, has the ability to vary their indexed holding via Exchange Traded Funds (ETF) within sectors for exploiting active insights. Over time, these small margins that are outperforming the benchmark are able to accumulate and compound returns. Therefore, the blend of low cost turnover, diversification and enhanced research gives investors the best of both worlds of passive and active management.

By using the IMA structure you are not invested in a pooled vehicle and are therefore not subject to the actions of other investors or the business risk of the investment manager. You retain beneficial ownership of the assets while maintaining complete transparency of your portfolio.

Below is a table comparing the different types of investment structures.



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