We are on the cusp of the next evolution in portfolio architecture. Managed accounts are fast becoming the default in a maturing wealth management industry. For investors, this means greater access to institutional-grade diversification across listed, private and multi-asset exposures, delivered through a well-governed, managed accounts framework.
A managed account is an investment arrangement that is professionally managed on behalf of investors typically through a model portfolio. The individual investor retains beneficial ownership with full look-through reporting of the underlying holdings. The investment manager or adviser has the authority to select investments, make asset allocation decisions, typically within an agreed framework.
The Institute of Managed Account Professionals’ (IMAP) recent funds under management census showed managed accounts in Australia surged to $232.8 billion in 2024, a 23.2% year-on-year increase, driven by strong market performance and $14.4 billion of net inflows in the second half alone.
Notably, separately managed accounts (SMAs), which are managed accounts that apply a standardised investment model across all investors in that SMA, now account for 64% of all managed account assets, with growth concentrated among eight firms managing over $10 billion each.
How we got here
The shift to managed accounts is a natural progression from the rise of managed funds. Remember, up until the 90s, share ownership was largely confined to high-net-worth individuals and institutions. A major turning point was when Commonwealth Bank and Qantas both floated in 1991 and 1995, respectively, prompting an uptick in share ownership in Australia. At the turn of the millennium and according to the ASX Australian Share Study in 2000, around 40 per cent of adults owned shares directly, although about a third had just one stock in their portfolio.
Today, that number is considerably higher with the introduction of compulsory superannuation, giving workers equities exposure via their super funds – often via the default balanced option.
Managed funds made balanced asset allocation via multi-sector products widely available for the first time to individual investors. But it was also at the expense of transparency, investment expertise and flexibility – issues that were subsequently addressed by exchange-traded funds (ETFs).
Today, the investment environment is shaped by complexity, personalisation and technology, and millions of Australian investors have evolved their portfolios to take advantage of an increasingly sophisticated managed account ecosystem.
The change to portfolios
More than a convenience, the evolution of managed accounts is a structural re-engineering of portfolios.
The most compelling shift lies in the asset mix: ETFs now comprise 19% of managed account holdings, up from 17% just six months earlier, and are increasingly replacing direct investments in equities.
This marks a decisive move toward liquid, transparent and cost-effective exposures, driven by platform design and investor demand. However, it does not displace the role of financial advisers, model portfolio managers, investment consultants and other wealth professionals, whose industry knowledge and depth of experience will be vital for helping investors navigate the new landscape. Not all managed accounts are created equal, and advisers are uniquely positioned to look beyond a managed account’s 'packaging' to examine the underlying architecture more closely.
Recent trends
A concerning trend we have observed is where the holdings in a managed account that was initially diversified across issuers are progressively replaced with the investment manager’s own funds. Given the flurry of mergers and acquisitions in this space, structural independence helps ensure portfolios remain separate from product manufacturers and free of commercial conflicts.
To limit bias and model drift, investments should also be backed by credible third-party oversight that is reinforced by strong governance with formal committees, clear rebalancing rules, and scenario testing. These standards should be essential, not optional, for those allocating significant capital.
The future is beyond traditional asset classes, and increasingly, we see financial advisers exploring alternative investments within managed frameworks. Private credit is one such alternative investment that is increasingly found within managed account portfolios, however we think exposure to this asset class still requires the acumen of an experienced adviser to navigate the risks and opportunities appropriately as per each investor’s risk profile.
Private markets, while compelling, lack the liquidity to respond in real time, creating mismatch risk across the total portfolio. The issue to overcome for managed accounts is that they cannot be constrained to illiquid assets. The idea of embedding 20 - 30 per cent private market exposure within a managed account portfolio is conceptually attractive but practically constrained. Should public markets experience a sharp drawdown, strategic asset allocation thresholds may be breached, triggering rebalancing imperatives that cannot be met by illiquid assets.
In this new era of convergence, the rigour of institutional governance meets the accessibility demands of the modern retail investor, financial advisers, investment consultants and investment managers that will lead this next chapter are those who adopt institutional disciplines, evidence-based models, robust oversight, independence and capital market fidelity, while still honouring the agility and nuance of personalised advice.
Managed accounts are no longer a luxury for the few, and the growth and innovation of the ETF ecosystem are serving to drive greater adoption.
To paraphrase Herbert Simon’s Models of Bounded Rationality, the hallmark of a mature investment culture is not the proliferation of products, but the architecture of decision-making behind them. The next frontier is not about access alone. It is about the quality of decisions, the integrity of design and the ability to adapt portfolios with precision and purpose.
Arian Neiron is CEO and Managing Director - Asia Pacific at VanEck, a sponsor of Firstlinks. This is general information only and does not take into account any person’s financial objectives, situation or needs. Investors should do their research and talk to a financial adviser about which products best suit their individual needs and investment objectives.
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