The main selling point of a separately managed account is the high level of customization it can offer, especially since these are taxable accounts. Investors are typically very aware of their portfolio, the objectives, and how it is being managed. Separately managed accounts are targeted for high net worth investors, investing typically starting at $100,000. For institutional managers, account size can range from $10 million to $100 million. For each style of investments (large-cap, small-call, etc), there is a separate account with a different minimum for each account. If an investor prefers a core approach, that is a single account managed by a single manager. 

As mentioned, separately managed accounts offer investors a larger say in how the account is managed. If there are certain restrictions the investor has put on the account, the manager must follow it. Separately managed accounts now offer individuals personalized management of their accounts, whereas before that was typically only offered to corporations or private institutions.

Yes, there is a fee structure associated with separately managed accounts. However, the fee structure can vary depending on the investment type. Managers will list their basic fee structure in a regulatory filing called a Form ADV part 2. An investor can get this form by contacting the manager or via online. However, the structure posted is typically not set in stone and can be negotiated between the investor and manager. Typically, the fee is set as a scale against the asset as it increases and/or decreases in volume.

Unlike pooled funds or syndications, investors will need to find other sources to investigate and evaluate the manager. The investor will want to find at least the performance data, the manager’s philosophy and approach. A manager should be able to share performance data with the investor, which will include quarterly returns the manager has achieved. As each manager is a unique person managing a unique account, they will have different methods of achieving investor goals. Finding a manager that can understand your approach and philosophy is important for the success of the partnership. The investor will also want to do due diligence on the manager’s investment process, their operations, organization, and compensation, and the manager’s compliance history. The investor can also set meetings with the representative to ask questions and determine whether the manager and parent company will be a good fit.