IMAs a good substitute for Australian equities
So you’ve heard of individual managed accounts (IMAs), but are unsure where they fit in when it comes to your clients’ investment portfolios?
The answer — at least according to David Wright, a director of research group Zenith Investment Partners — is as a substitute to an Australian equities managed fund.
“We tell advisers to use an IMA as the Australian equities part of the portfolio rather than use a managed fund,” he says.
“However, we also recommend direct stocks rather than use of a selection of stocks that are offered by an IMA if the client wants a particular equity in their portfolio.”
Wright says while an investor could swap their Australian equities managed fund allocation to an IMA, there are occasions when both may be appropriate.
“There is an argument for having both if the IMA is specialising in a particular area such as small caps,” he says.
“It would make sense to have the managed fund looking after larger cap stocks.”
Wright says some IMA providers can provide a specialist manger role in the investor’s portfolio.
“There is definitely the potential to do a mix of IMA and managed funds,” he says.
“But a watch must be kept on remaining true to the IMA manager’s portfolio.”
Wright says if a client wanted to keep a stock that the IMA manager had originally recommended, but subsequently wanted to sell, then the ideals of investing in this type of vehicle become blunted.
“If the client stays with certain stocks, the model portfolio becomes too diluted,” he says.
“If the client is going to follow the manager and the model portfolio, they must stick with it.”
Recommended for you
Multiple industry organisations have shared their thoughts on AFCA’s proposed rules amendment, supporting the idea of firms being named publicly when they fail to comply with determinations.
Channel Capital has appointed a head of investment oversight who joins from 14 years at asset consulting firm JANA Investment Advisers.
Licensee Centrepoint Alliance has completed the acquisition of Brighter Super’s annual review service advice book, via Financial Advice Matters.
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
