Unified managed accounts are in vogue, but watch the fees
| Jan 21st, 2007 | Filed under: Investment Management Fees | By: Alpha Male |
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By: Will Swarts, SmartMoney.com
Published: January 12, 2007
A quick follow-up to our posting on UMAs being an enabling technology for retail adoption of portable alpha: this article illustrates we’re not alone in our belief.
“Unified managed accounts expand on the basic function of conventional SMAs, which allow investors to own actual shares of stock, rather than shares of mutual funds that invest in those stocks, but also fold in other investment portfolios. Putting your mutual fund and ETF portfolios under a UMA structure won’t do much for your tax situation [ed: UMA proponents disagree] , but it boosts the level of coordination between these types of investments, letting you get the most out of the money management services for which you’re paying.”
Buying individual shares - and more importantly ETFs – allows advisors to create synthetic mutual funds by combining their own betas with alpha from various sources. Conversely, the ability to short-sell individual shares or ETFs allows investors to isolate alpha and reduce systematic risk (e.g. market risk) in their portfolios.
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