What does excellence look like?

The IMAP Managed Account Awards are settled for the year. The finalists have been shortlisted and the winners have been chosen.

So, congratulations to Stanford Brown in the Licensee Managed Account Award, Elston Asset Management in the Innovation Award, and all the other winners.

But what did we learn from reviewing over 100 entries in the various categories?

There are a number of key lessons that provide some guidance to the way in which managed accounts – and indeed, advice – is likely to develop over the next few years.

Firstly, the variety of portfolio styles shows that we are well and truly past the Aussie equity large cap portfolios as a staple of managed accounts.

Secondly, the key portfolio management area is multi asset class portfolios. This area is really being dominated by the managers who originated in advice businesses - all the finalists were originally part of advice businesses, and even more interestingly, all have been spun out as standalone enterprises.

Related to this is how strong the resourcing of the portfolio management function is in these businesses; whether it’s salaried employees or investment committees made up of individuals with extensive research, asset allocation or manager selection experience.

The objectives of the portfolios presented to us were far more varied than you might expect to see in a range of unitised managed funds.

Some were built to meet real return objectives. Some were developed to support a goals based advice philosophy or a cash plus model that targeted an after fees return in excess of term deposit rates, but with equivalent security and daily liquidity.

These are portfolios that are custom built to meet client goals and designed for use in an advice environment.

Since many of the portfolios we were invited to consider were comprised of managed funds or listed vehicles, like ETFs, the approach that is being adopted is much more like that of many industry funds, within the constraints created by platform or administrator product lists.

Some of the investment returns being achieved are stellar, with Sharpe ratios in excess of 2. But on the other hand, the performance history available for many of the portfolios is quite short, so it remains to be seen whether managers can consistently deliver for their clients.  

The entries also demonstrated some of the constraints that still confront managed accounts. With a few commendable exceptions, some asset classes hardly made an appearance, such as fixed interest, infrastructure or other alternatives. Derivatives for portfolio protection were also completely absent.

But a final lesson concerns the presentations themselves.

For an industry that is principally about communication, so many of the presentations we received were poorly put together, failed to address the questions asked, and had performance or fees data that were opaque at best. This made it difficult for experienced people to actually understand the true details of the offer.

Toby Potter

Chair