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	What is SMA?
	SMA stands for Separately Managed Account. The investment of an individual investor is managed like an individual portfolio. The securities in the account are visible and portable just as they would be if purchased directly though a exchange broker. Typically, the investment in an SMA is allocated across one or more existing investment models. These investment models are provided by investment specialists and they vary in focus and profile – in much the same way that mutual funds vary in their risk and return objectives. Within an SMA there will be models with different levels of risk and return, each with a different emphasis. This diversification ensure that the individual investment needs of all account holders are met. Some SMAs allow the investor to customise the portfolio by prohibiting certain stock, substituting one stock for another.
	SMA investment models
	The investment models in an SMA specify the variety of options available to the individual investor and will also determine the range of services available to the SMA manager and personal financial adviser. Typically the SMA manager shall discus with the investor to understand the goals and preferences, and select a combination of models available within an SMA matching the requirements of the investor. The design and choice of models for portfolio normally includes three main steps: Models are created by investment professionals, analysts and fund managers and provided for use in SMAs A selection of models is chosen by SMA providers to be included in a particular SMA service A financial adviser or SMA manager selects models that best match the investment strategy of an individual investor and assigns the appropriate weighs for the selected models
	How to invest in an SMA
	An SMA service is provided by a group of dealers or a SMA fund manager and available to the individual investor through the retail financial advisers. Typically, the individual investor applies for an account in an SMA, similar to as you would apply for units in a managed mutual fund. However, there are some important differences: SMA account holder actually owns the underlying securities, i.e. the ownership of the stock in the portfolio is directly owned by the investor not the SMA. Typically the investor will able to track the portfolio through some sort of web-based application The SMA portfolio is invested across a number of models within the SMA which the financial adviser assists by choosing models and their weigths in accordance with the target preferences and risk constraints The investor can enter an SMA both with cash or securities. If the investor already has a portfolio of stock, the Capital Gains Tax (CGT) events are minimized by transferring the stock directly into the SMA account without realising the stock.
	Fees and costs
	Fees vary widely across SMAs – but in all cases this is a substantial factor to take into account when considering alternatives for investing. Generally an SMA will have a fee structure that includes one or more of the following types of fees: Administration fees Management fees Performance fees Adviser fees Brokerage Some fund managers add charges that are higher for small investors than would normally be the case in a mutual fund and in any case considerably higher than the costs of direct trading through a brokerage. The charges are a critical factor in influencing the long-term profitability of the investment.
	Features vary
	The perceived flexibility of SMAs are making them popular – and the market is already seeing an increasing number of them on offer. However, SMAs can vary significantly in the features they offer. There are a few critical features: Blending – means that the portfolio of an investor having holdings managed across multiple models behaves liak a single portfolio. Not all SMAs are blended. The benefits of blending include that the investor can see the holdings as a single portfolio and the investment can take full advantage of netting. This can save in brokerage costs when differenrent models operate on the same securities. Reporting – SMAs that offer online services mean that you can access reports as required including immediate confirmation of trades. The web based reporting works equally fine for the real-time tracking of the portfolio and for the reporting periods standard in the financial industry. Tax Reporting – most likely investing in an SMA may result in an increased number of events that trigger CGT. This would increase complexity of doing taxes unless the SMA can directly report at the level required by the tax authorities or in a form usable for the accountant of the investor. Fees – as we mentioned above, in most cases the fees and charges will determine how the long term investment targets can be met.