Assets under management in separate account consultant programs have, over the past six years, more than quadrupled in size to $275bn by March 2001, according to the the Cerulli Report series.
Increasing from just under $75bn at year-end 1994 they are projected to surpass $650bn by year-end 2005, according to Cerulli’s ‘Asset Management: The State of Separate Account Consultant Programs.’
Cerulli Associates (CA) in the US found that investors’ demand for customisation and tax efficiency as well as shifts in traditional institutional defined benefit and mutual fund markets is spurring new entrants to join the pool of 150 primarily institutional managers tracked by CA that control 70% of industry assets.
On balance, CA views the entrance into this market as being most natural for institutional managers given their experience managing, operating and selling separate accounts, despite being unfamiliar with retail distribution.
With a majority of money managers reporting break-even in the separate account business at $250m or more in assets, scale will become of increasing importance in a market where asset managers are being asked to provide more support for less in fees. As a result, CA expects to see increased acquisition activity including a heightened interest in the holding company model in order to gather assets.
Overall, CA is bullish on the growth of separate account consultant programs, and expects managed accounts to benefit from the tremendous pool of assets released annually through Individual Retirement Account rollovers.
However, the company said the full potential of this growth may become muted without properly training the growing ranks of inexperienced sales representatives as to the tenets of the investment counselling process.
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