Separately Managed Accounts: how do they work?
What are Separately Managed Accounts?
Separately managed accounts (SMAs) are structured to provide each client with their own account but delegate the responsibility of management, maintenance and monitoring to a third party. Using this structure, you do not have a HIN (holder identification number) associated with the holdings as they are held with a custodian. As an investor, you still retain the beneficial ownership of the securities purchased under the SMA structure as well as most rights a regular shareholder receives. Franking credits, dividends and stocks alike are registered under your name and the only major difference is that voting rights are delegated to the SMA manager, which in this case is Rivkin. Typically, this is to ensure that when voting events occur, the voting power of all accounts is used to provide the most possible benefit to our clients.
Advantages over Unit Trusts (Managed Funds)
This type of structure differs from that used by managed funds or unit trusts whereby the investor allocates capital to the fund in exchange for an ownership stake in the fund, often referred to as a unit. An advantage that SMA’s perhaps provides over funds is that the investor retains ownership rights over the holdings, meaning if anything was to happen to the managing parties, such as bankruptcy, then your position is not compromised as holdings are registered in your name.
Because all funds allocated by individual investors are pooled together, Rivkin is able to secure a low brokerage rate of 0.055% per trade and the overall cost can be reduced. This is particularly relevant for smaller portfolios which are able to avoid minimum brokerage costs that might represent a disproportionate percentage of their overall portfolio value that would come in achieving the same diversification and trading regularity.
SMA strategies used by Rivkin
Rivkin currently is the investment manager for Apex SMA products. We provide investors with four types of portfolios to ensure that different investment approaches can be satisfied.
ASX Growth: The ASX growth portfolio will source stocks from within the ASX200 and be a combination of stocks generated from our ASX Momentum and ASX Value strategies with a focus on achieving returns via capital growth. Click here to learn more.
US Growth: This will work the same as the ASX Growth portfolio, in that for US Growth, we will now be combining the US Momentum and US Value strategies with a focus on achieving returns via capital growth. Click here to learn more.
ASX Income: The ASX Income portfolio will hold both individual stocks and ETFs. Individual stocks will be sourced from a combination of our Blue-chips and Events strategies. The Bluechips Strategy focuses on the highest dividend-paying stocks from the ASX50, while The Events Strategy participates in corporate actions, such as takeover arbitrage. Click here to learn more.
Low Volatility: The Low Volatility strategy holds ETFs which provide exposure to the four major asset classes, being equities, gold, cash, and bonds. Click here to learn more.
Another advantage of the Apex SMA strategies is their relative cost. No upfront costs are associated with the use of these products and brokerage rates used are competitively priced below the typical retail brokerage rate, at 0.055% (roughly half the rate of the lowest online brokerage rates).
Management fees stand at an annual rate of 1.55% plus GST charged on a monthly basis, except for the Capital Stable strategy which stands at 1% plus GST due to the low level of trading.
Performance Fees assigned use a high watermark fee structure to ensure that the interests of the investor and the actions of the managing body (Rivkin) align. A fee of 10.5% is charged on ‘additional’ profit only ensuring that performance, or lack thereof, is accurately represented. For the Capital Stable strategy, once again, a lower performance fee of 5% of ‘additional’ profits is used.
Key parties involved in the SMA process
Firstly, Perpetual* is the designated ‘responsible entity’. To understand the full responsibilities of an RE please refer to the PDS. However, simply put Perpetual reviews the structure and all parties involved comply with current regulations. In this case, Perpetual has outsourced stock selection and portfolio structuring to Rivkin to ensure potential clients can gain access to the performance achieved by Rivkin’s strategies.
Additionally, Perpetual has outsourced custodian and administration services, such as accounting and transaction recording, to Apex.
The process of setting up a SMA is very simple. Once the appropriate paperwork has been filled out and verified the next step is to decide which strategy best suits your own interests and then begin allocating the capital you wish to use.
For additional information or support related to the use of SMA’s please click here to view a webinar about Apex SMA’s or fill in the SMA information form below.
*This product PDS is issued by The Trust Company (RE Services) Limited a part of the Perpetual Group, ABN 45 003 278 831, AFSL No 235150.
Please click here or request the PDS to understand the full risks and cost of the product before taking a decision to invest in it.
Important Notice: Please consider your own financial situation before investing in our products. Rivkin does not provide personal financial advice and does not take anyone’s personal financial situation into account when structuring its model portfolios.
Past performance and/or backtesting is not a guarantee of future performance. Investing and trading carry financial risk, when judging performance please consider the different types of investments and levels of risk associated.
To learn more about how we calculate performance click here.
The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the responsible entity and the issuer of units in the Apex Separately Managed account. It is general information only and is not intended to provide you with financial advice, and has been prepared without taking into account your objectives, financial situation or needs. You should consider the product disclosure statement, available on www.rivkin.com.au, prior to making any investment decisions. If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.
All opinions and estimates constitute judgments of Rivkin and are subject to change without notice. These statements should therefore not be relied upon as an accurate representation or prediction as to any future matters. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Past performance is not indicative of future performance.
Total returns shown for the Apex Separately Managed Account have been calculated using exit prices after taking into account all of Perpetual’s ongoing fees and assuming reinvestment of distributions.