Managed Account Overview
The global hedge fund industry has been in turmoil and lost billions of dollars in assets for investors over recent months. It is the responsibility of those in the financial and investment community to provide opportunities that are in-line with what investors are now seeking. For much of the last two decades, hedge funds have been an important investment tool for the wealthy, but as increasing redemptions illustrate, the educated investors are seeking alternative vehicles.
Currently in the USA the Managed Account sector is growing at a faster rate than managed funds. According to research from Cerulli Associates by 2010 US$2.6 trillion is expected to be invested in Managed Accounts, with nearly five million US households using the product.
The Managed Discretionary Account (MDA) is personalised to the highest level for the individual investor. It also gives the portfolio manager authority to make investment decisions and therefore allows them to take advantage of dynamic market conditions in the most timely and efficient manner.
The MDA is governed by a particular strategy and Enfinium Capital Management will review the investors current circumstances to ensure they fit with the investment objectives and risk profile.
Portfolio manager has full discretion on buy and sell decisions on the clients portfolio whilst maintining the initial investment strategy.
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Benefits Of A Managed Discretionary Account (MDA)
One drawback to investing in a hedgefund is the lack of access to the investors assets and the inability to exert control over their investment strategy along whith the lack of transparency is a hurdle they will no longer be able to tolerate. In recent times we have seen mass movement toward liquidity, pulling cash out of investments, which ultimately exposed Madoff and ended his long running Ponzi scheme.
To investors weary of hedge funds that provide them with limited control, the Madoff scandal was proof that control and transparency are crucial. Asset managers need to provide this group of sophisticated investors with alternative strategies. Money still needs to be managed, but the vehicle that is used to manage financial assets will change and individually managed accounts, separately managed accounts and ultimately, unified managed accounts, will grow in popularity. They both provide the market expertise of an asset manager with the kind of individual control and transparency that many investors will now be demanding.
Enfinium Capital Management is at the forefront of the managed account strategy design and currently provides four types of managed investments to the general public, Global Premium MDA, ASX Asian Growth MDA, the Enfinium ASX50 MDA and a Dynamic FX MDA.
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Separately Managed Accounts (SMAs)
A Separately Managed Account (SMA) is a new phenomenon and were first introduced in Australia in the early 1990s. Unlike an IMA which is built from scratch, an SMA is made of a selection of managed funds called model portfolios housed under one account. Unlike a managed fund, however, the client owns the underlying shares, and hence, enjoys the benefits and flexibility that are lost once in a managed fund.
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Individually Managed Accounts (IMAs)
By contrast an Individually Managed Account (IMA) is similar to a private investment portfolio which has existed since the birth of the stockmarket. Moreover they are a one-on-one relationship between the investor and portfolio manager.
How do IMAs differ from traditional broker services? Broadly speaking, brokers can only service a limited number of clients (up to 50, in some cases) while IMAs are powered by investment houses or firms that are big enough to support a larger number thereby providing the service at a lower cost and with more bells and whistles than a small to mid-size broking firm can potentially provide. Another key difference is that conventional brokers charge transaction- based fees while IMA providers charge fees based on funds under management (FUM).
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