Separately managed account

Yeah, I mean, the fees are kind of a function of how we got started.

So I started the fund as an SMA, separately managed account.

It wasn't a partnership, and so the tax treatment on performance fees is less desirable in a separately managed account structure.

You know, for example, the performance fee in SMA is paid in cash, not as allocation, and then it's taxed at the income tax level, not capital gains level, whenever you would end up selling that allocation like it is in a fund.

So for those two reasons, I decided when we started with an SMA just to charge a flat 2.5% management fee, no performance fee, until we would reach a scale to then be able to launch the partnership, and then then I could layer on the one in 20.

And so today, once I launched the fund, I brought in the SMA investors into the fund under that same fee class of flat two and a half.

And so the fund today is kind of a mixture of flat two and a half and one in 20.

Now, we don't offer the two and a half to anybody anymore 'cause we only take qualified clients, but that's the reason why there's kind of this, this mixture there.

I mean, we're seeing a lot of it.

And now we're seeing a lot more SMAs.

That's the more recent trend.

And I'd love to hear what you're seeing, because one of the constraints is obviously underwriting the track record.

Like there's no question.

The dollars allocated to SMA type products is growing massively in every direction.

And that comes from both allocators of every kind, meaning, you know, sovereign wealth funds, endowments, and then a whole set of industry players that are like SMA platforms themselves that are kind of, um, In between a multi-manager and a endowment, they're kind of a fund, but they're not in-housing any of that risk where they're, you know, all of the dollars they allocate are pure SMAs.

And then there's also multi-strats that are allocating to SMAs, kind of leveraging their PD functions and leveraging, you know, all kinds of things.

Yeah.

And with the Fidelity account, Nick, is somebody gonna be doing that for you, managing that? Or with this SMA, will, will it be you doing that? 'Cause that's a lot of work.

Yeah, it w-

Uh, that's a lot.

It is different, and in a mutual fund or a private fund, investors own shares or units of an entity, which is the fund, which in turn owns the underlying assets.

In a separately managed account, an SMA, the investor holds legal and beneficial title to the actual underlying securities, the individual stocks, bonds, or digital assets, let's say, that are held in their own dedicated account at a custodian.

SMAs grew popular with wealthier investors, and by the 1990s, there were mass market versions offered to smaller clients.

Now, this created a legal question.

If a firm runs thousands of small accounts on the same model portfolio, at what point is it really just operating an unregistered mutual fund? So you have separate accounts, but they all do the same thing.

That would make the advisor the one running the account.

A vault is the account, and the curator is running the account.

So can we just port SMAs to vaults and curators as is? Here's V with more on that.

Portfolio manager of the equity maps at Morgan Stanley Wealth Management, where he oversees the equity model portfolio team and thematic research project products including Alpha Currents, they love that, US Policy Pulse.

He's lead portfolio manager for the US Model and Dividend Equity Strategies, part of a suite of eight long-only SMAs.

He has spent his entire career at Morgan Stanley, starting in 2005 as associate in the research division.

He's a regular on CNBC Squawk Box and Closing Bell Overtime.

But there's an important difference between choosing not to manage your own portfolio and not having your portfolio managed at all.

One option that many people find helpful is working with a professional money manager through something called a Separately Managed Account, or simply an SMA.

Instead of trying to make every buy and sell decision yourself, you hire an experienced professional whose job is to monitor your portfolio, make adjustments when needed, and keep everything aligned with your long-term investment strategy.

You still own the account.

Others would much rather check in from time to time and let a professional handle the details.

Neither approach is right or wrong, but making that decision intentionally can help keep your investment plan on track.

If your savings are meant to grow over the long term, and market volatility makes you wonder whether your portfolio is still built the right way, working with a professional money manager through an SMA may be worth considering.

It provides professional oversight, ongoing discipline, and a structured investment process, so your portfolio doesn't become a collection of investments that happened to accumulate over the years.

Got about $140 million plus or minus in capital there.

And that's all fresh money that didn't come from the SMAs or from money being moved from another internal source.

So it's all fresh capital, which has really been a good adoption pace for us for a brand

new fund.

So we didn't want to be that.

We were pretty convinced that we had a good amount of demand because the amount of times we were told, well, if you get this in an ETF, you know, I can allocate to it, but I'm not going to do an SMA.

That's soft, right? So, well, yeah, we took enough of those names down over a couple of years while we were working with the SMAs to get those out into the hands of people.

But we were really confident that we had a product that would raise

Our programs are separate and apart from that world, right? So we operate in the SMA business.

And predominantly what we're doing, and we do a lot of different things, but predominantly what we're doing is running option overlay programs in SMAs against concentrated equity positions.

Our world has gotten substantially larger than just that area of this space.

But that's where we got our start.