Archer Insights

As seen in FUNDfire: $60B Manager Enters Traditional SMA Space

The following article was originally published in FUNDfire

By Alyson Velati February 14, 2019

Cohen & Steers added traditional retail separately managed accounts (SMAs) to its menu, as a way to lure advisors that service high-net-worth clients.

The new vehicles are designed to complement the firm’s existing suite of model-delivery strategies offered which it has offered through unified managed account (UMA) platforms since 2006, says David Edlin, executive v.p. and director of wealth management consulting at Cohen & Steers.

“We had tremendous interest from advisors and high-net-worth clients to access our investment teams through separate account structures,” he says. “We’ve offered mutual funds and UMAs for a long time and in this environment, there has been an increasing demand for SMAs because of the tax and expense benefit they provide. We’re responding to advisors’ interest to best serve high-net-worth investors."

Entering the retail SMA wrap space will provide the firm with scale, says Jim Giallanza, executive v.p. and head of investment administration at Cohen & Steers.

The initial products launched in SMA format include REITs, midstream energy & MLPs and preferred securities strategies, which the firm previously offered in other formats such as mutual funds and closed-end funds.

The strategies aren’t yet available on any third-party platforms, according to a company spokeswoman. The firm plans to offer the new SMAs to distributors it works with on UMAs. The spokeswoman declined to disclose the names of distributors that Cohen & Steers works with on the UMA platform.

Cohen & Steers had $60 billion in assets under management as of Jan. 31.

Cohen & Steers tapped Archer, an operations and outsourcing provider, to get its SMA business off the ground.

Archer will help integrate SMAs on sponsor platforms through account openings, account maintenance and trade administrative services, says Matt Caulfield, executive v.p. of business development for Archer.

“And having the connectivity with their distribution partners and sponsors is critical for them to expand and integrate [the SMAs] in a quick and efficient manner,” he says.

The partnership will allow Cohen & Steers to enter the SMA channel “in a cost-effective way and a quick [return on investment] on their product expansion,” says Caulfield, noting that other managers will continue to bolster their product offerings – especially in the SMA space – to meet distribution partners’ needs.

Newer entrants to the SMA marketplace often choose to outsource to providers like Archer, since they have the connections to interface with wirehouses and other institutional providers, says Dennis Gallant, a senior analyst at Aite Group.

SMAs had $26.6 billion in flows at the end of the third quarter of 2018 and had a little over $1 trillion in assets under management, according to research from Cerulli Associates and the Money Management Institute.

Other managers have also moved to develop strategies previously available in other formats into SMAs, with the hopes of enticing distributors.

Legg Mason, one of the largest SMA managers in the industry, recently launched an emerging markets SMA based on a mutual fund strategy from its affiliate Martin Currie, as reported in January 2018.

And at the end of 2017, T. Rowe Price entered the SMA space for the first time, offering both traditional SMA and model-delivered products, as reported.

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