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Managed Account Assets Jump 1.2% to $535B in 3Q

Assets under management in separately managed accounts (SMAs) jumped 1.2% in the third quarter, according to figures the industry's top trade association released last week.

The third-quarter report by the Money Management Institute (MMI) also estimated that assets in SMAs have grown 7.2% to $535 billion since the start of the year. And as assets in SMAs have grown, so has interest in them; attendance at the industry's annual Solutions Conference, held early this month in New York, was up 13%, according to MMI, even after a record-breaking turnout in 2003. A September bank conference held by MMI in Dallas received a record turnout as well.

Christopher Blunt of New York Life Investment Management said that demographics and increasing awareness have helped the SMA industry grow as quickly as it has, from just over $400 billion in 2000 to its current clip. He called the growth "continued and sustained."

Since the beginning of 2001, membership in MMI has jumped 90%, and different types of financial services firms are entering the fray. According to Arlen Orlansky, the MMI's associate director for membership, more insurance and banking firms are getting involved in SMAs now. "We've seen robust growth in the number of industry players as the assets under management have grown," Orlansky said.

According to a detailed MMI report on second-quarter activities, net sales numbers continue to be a major factor behind the industry's growth. MMI is projecting that net sales will increase some 90% in 2004 compared with 2003, bringing a total of $59 million in net new industry assets by year-end.

One large driver of this growth is multiple discipline products (MDPs), which are diversified separately managed accounts run by differing portfolio managers but consolidated into one account. The average account size of an MDP grew 12.9% to $390,968 in the second quarter. MDPs tend to garner larger account sizes because they are designed to invest in a broad array of disciplines and vehicles. Investors looking to roll over assets in retirement accounts have been a major factor in MDP growth, according to MMI research.

Financial Research Corp. compiles MMI's quarterly assets under management figure, based on program totals reported by the top sponsor firms as well as a selection of firms representing the remainder of the managed account industry.

Wealthy Showing Renewed

Confidence in Economy

America's millionaires showed renewed confidence in the economy in October, according to an index by Spectrem Group. The Spectrem Millionaire Index showed that wealthy Americans were "mildly bullish" at the end of October. The rebound was to an index reading of 14, from seven in September when the index fell to "neutral" for the first time this year.

Millionaires were more optimistic than the overall affluent population, as tracked by the broader Spectrem Affluent Investor Index of households with $500,000 or more of investable assets. This index remained at a neutral level of four in October and has been in neutral territory since July.

George H. Walper Jr., Spectrem president, said the upswing in confidence among millionaires is good news for all investors since this group tends to set trends for the affluent population.

In response to an open-ended question about the factors most affecting their investment plans, affluent people cited: stock market conditions (16%), the economic environment (12%); household cash flow (10%); the election (7%); interest rate increases (6%); household income (5%); and low investment returns, retirement and job security (all at 4%).

Legg Mason, SEC in Talks

Over Improper Fund Trades

Legg Mason charged itself $1.2 million in the third quarter in anticipation of settlement costs stemming from negotiations with the Securities and Exchange Commission over improper mutual fund trades, a company filing with the Commission shows.

In its quarterly report, the company was quick to note that the charge does not indicate a specific amount, and admitted that the actual settlement could be for an even greater amount of money. The Baltimore-based firm is still negotiating over charges of improper trades at a company subsidiary, Legg Mason Wood Walker.

The SEC is said to be conducting two separate investigations at Legg Mason Wood Walker, and the settlement talks only pertain to one of those investigations. The company did not elaborate on either investigation, only saying that it could not make any predictions on outcomes and that those investigations are related to late trading and market timing.

New York Attorney General Eliot Spitzer, who touched off the industry-wide probe last September, has also subpoenaed Legg Mason.