The challenge to hold real estate in managed accounts
The inclusion of real estate assets in managed accounts can be challenging as it creates difficulties when it comes to rebalancing.
In a webinar with the Institute of Managed Accounts Professionals (IMAP), David Wright, chief executive of Zenith Investment Partners, said many investors were asking their advisers for exposure to this type of asset as they sought alternative sources of return in an environment of rising rates and inflation.
“Clients are asking their adviser if they can get exposure and, in theory, yes they can but the vast majority of managed accounts we manage, it is too problematic to have less liquid exposure from a portfolio management, trading execution and rebalancing perspective.”
He said they tended to be the domain of high net worth investors, high net worth advice businesses and private banks for this reason as well as because of problems regarding access.
Wright said: “I’ve seen the emergence and launch of global direct property funds, direct infrastructure funds, private equity, private credits, commodities, the whole shebang. So the access is not so much of an issue as it was but including them in managed accounts is challenging.
“It can be done and can be done with platforms and most are working on mechanisms to better facilitate that but at the moment, it’s a real challenge. Some of these funds are not daily liquid with daily liquid exposure and that determines how you are able to rebalance and readjust the portfolio.”
An alternative route, he said, would be to have a managed account that was dedicated to investing in illiquid investments and allocate to that separately.
Meanwhile, Irene Guamatsia, director of research at Investment Trends, said on the webinar about the growth in managed account usage with more advisers using them for their clients, using them for a larger proportion of clients and putting more money into them.
Over half of advisers (53%) were now using managed accounts, up from 44% in 2021.
“Managed account advisers reporting allocating 39% of new planning flows into managed accounts and they intend for this to continue and rise to 46% in the next two years.
“Potential managed account advisers, who are not currently using them, they say they are intending to use them over a three-year time horizon, so there is certainly more growth ahead.”
AUTHOR
Laura Dew
Recommended for you
TAL has introduced four new courses to its Risk Academy focused on ethical dilemmas as part of Ethics Month to help advisers meet their CPD requirements.
Unadvised Australians believe they need $2 million to retire comfortably, according to Colonial First State, a wide variance compared to advised individuals which estimate $1.3 million.
Financial advisers can now access Vanguard’s diversified managed account strategies on HUB24 and Netwealth, marking a “significant expansion” through new distribution channels.
The heads of two financial advice licensees have joined the board of the Financial Services Council as it looks to deepen its engagement with the space and strengthen its representation.
Add new comment