Individually managed accounts (IMAs) and separately managed accounts (SMAs) enable trustees of SMSFs to access direct international and domestic equity portfolios with greater control and transparency compared to the traditional managed fund options, however the differences between and benefits of IMAs and SMAs are perhaps not well understood and this paper discusses the key differences and benefits of each.
First, it is important to understand the differences and benefits between an IMA, an SMA, managed funds and other investment structures.
An SMA is a product - each investor gets the same portfolio
Under an SMA - a client invests in a model portfolio managed by a professional investment manager, all trading, administration and investment reporting is taken care of for the client by the platform administrator. The client's financial adviser will assist the client in determining whether an SMA is suitable to meet their investment requirements and which SMA or SMA models to select.
There are clear benefits of an SMA for a client.
An SMA provides access to a professional manager and its research capability with the benefits direct share ownership. Unlike a managed fund, each client is able to see exactly what investments are in their portfolio. Tax events and transaction costs are not shared across clients and the cost base of the clients investments will be the date of their investment in the model portfolio. Further, a model portfolio is typically a high conviction portfolio, with the total number of holdings in the model limited to 20-25 securities whereas in a managed fund the number of securities is typically not specified and is typically much greater.