Unraveling Separately Managed Accounts and Mutual Funds
A guide to unlocking the key differences between these two popular investment vehicles
WHAT IS A
MUTUAL FUND?
A mutual fund, overseen by investment professionals, pools funds from multiple investors to create a diversified portfolio comprising various securities like stocks, bonds, and other assets.
Key characteristics of mutual funds:
- Diversification: Mutual funds offer instant diversification by investing in a variety of securities to help spread risk across different assets, which can potentially reduce the impact of poor performance by any individual security in the overall portfolio.
- Professional Management: Mutual funds are managed by professional managers who conduct research and trade securities to achieve the fund’s investment objectives, utilizing their expertise and experience to generate returns for the fund’s investors.
- Liquidity: Mutual funds allow investors to buy or sell shares on any business day at the fund’s net asset value. This liquidity feature provides the investor flexibility and access to invested funds relatively quickly.
- Variety: Investors can choose mutual funds that align with their specific investment preferences and objectives. They can focus on different asset classes, sectors, geographic regions, or investment styles.
*Diversification does not ensure a profit or guarantee against a loss.
Mutual funds are like buffets, with each dish representing an individual security and managed by experienced chefs (fund managers) to ensure a balanced, diverse, and enjoyable experience.
What is the difference between mutual funds and ETFs? Learn more here.
WHAT IS A
SEPARATE ACCOUNT?
A separately managed account (SMA) is an account owned by an individual investor but managed by an investment professional. Unlike mutual funds and ETFs, which pool funds from multiple investors, a separate account is tailored to meet a single investor or a client’s specific investment objectives and preferences.
Key characteristics of separate accounts:
- Direct Ownership: The individual client has direct ownership of the underlying securities in their portfolio. This differs from mutual funds or ETFs, where investors own shares of the fund rather than the individual securities. Direct ownership provides transparency and gives investors more control over the specific assets in their portfolio.
- Professional Management: Like mutual funds, professional investment managers also manage separate accounts. They leverage their expertise in analyzing securities, constructing portfolios tailored to the client’s investment objectives, and making investment decisions.
- Customization and Flexibility: The client and the investment manager can create a custom investment strategy that fits the client’s preferences, such as incorporating specific investment themes, avoiding certain industries or companies, or considering tax implications.
- Higher Minimum Investment: Separate accounts often require a higher minimum investment than mutual funds or ETFs. The higher minimum reflects the personalized nature of the account and the dedicated management provided to the individual client. The specific minimum investment requirement varies depending on the investment manager or firm.
SMAs resemble tailor-made suits – just as a tailor meticulously crafts a suit to fit an individual’s specific measurements and style preferences, an SMA is customized to meet a particular investor’s unique investment objectives and priorities.
Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility. There can be no assurance that the Fund will achieve its stated objectives. Diversification does not ensure a profit or guarantee against a loss.
To determine if a Fund is an appropriate investment for you, carefully consider the Fund’s investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund’s summary or statutory prospectus which can be obtained by clicking here or calling 1-866-777-8227. Please read it carefully before investing.
Cambiar Funds are distributed by SEI Investments Distribution Co., 1 Freedom Valley Dr. Oaks, PA 19456, which is not affiliated with the Advisor. Cambiar Funds are available to US investors only. Strategies included within the Separate Account section are not mutual funds and are not affiliated with SEI Investments Distribution Co.