The SMA Advantage

With Separately Managed Accounts (SMAs), access to the same investing advantages that ultra high net worth investors have enjoyed for decades is available.

Many investors have been able to achieve some diversification through typical or common investment products.  However, many of these investment vehicles or complete portfolios can suffer from high internal costs, hidden fees, and tax inefficiencies.

Endowment Model Asset Management for All Investors

For many years, the asset managers at Harvard and Yale have outperformed common benchmarks, such as the S&P 500, by using the 'endowment model,' which employs multiple institutional money managers who allocate the portfolios among global stocks, bonds, and cash, as well as precious metals, farm commodities, timber, and oil and gas, to name a few examples. This broad diversification can be used to build a robust portfolio that provides downside protection and upside capture.

 

In the 20 years between 1994 and 2014, Harvard's endowment returned 12.3%1 and Yale's earned an even better 13.9%2. During this same period, the S&P 500 grew by 9.85%. In contrast, the average investor, as defined in the 2015 Dalbar QAIB report, obtained returns of only 3.34%3.

 

As the graph on this page shows, the impact of these disparities in returns can make an enormous difference in an investor's wealth. Separately Managed Accounts along an academic approach to portfolio design may significantly improve returns earned by individual investors.

 

1 http://www.hmc.harvard.edu/investment-management/performance-history.html
2 http://news.yale.edu/2014/09/24/investment-return-202-brings-yale-endowment-value-239-billion
3 Dalbar 2015 Quantitative Analysis of Investor Behavior