Professional management and direct ownership in one package? There\u2019s a reason why sophisticated investors and advisers alike are gravitating towards separately managed accounts (SMAs). SMAs can be particularly well-suited to growth-oriented portfolios and offer transparency and control. <\/p>\n
In the first part of Livewire\u2019s mini-series, I discussed the basics of how the SMA structure works. You can read more in this interview here<\/a>. In the second part of the series, I\u2019ll discuss what growth investing looks like in this structure and why investors use it for this purpose. <\/p>\n Why SMAs work for growth investors <\/p>\n Growth investing typically involves allocating capital to assets with strong potential for appreciation – such as equities, ETFs, managed funds, or alternative investments. SMAs allow investors to hold these assets directly, rather than through pooled vehicles like managed funds or ETFs. This direct ownership provides several advantages: <\/p>\n Tax efficiency: Unlike pooled funds, SMAs don\u2019t carry embedded capital gains, allowing for better tax management. <\/p>\n Customisation: Portfolios can be tailored to specific goals, risk tolerances, or ethical preferences. <\/p>\n For high-net-worth individuals or those with longer investment horizons, these features make SMAs a powerful tool for compounding returns while maintaining control. <\/p>\n Who should consider this approach? <\/p>\n Growth-focused SMAs are best suited to investors who: <\/p>\n Costs vary depending on the provider and platform, but generally include: <\/p>\n Building a growth-focused SMA portfolio <\/p>\n We recommend clients start with clear goal-setting and asset allocation and invest through a structured model. <\/p>\n Setting Targets and Allocations <\/p>\n For a growth investor, the target might be an annualised return of 10\u201312% over a five-year horizon. To achieve this, we typically allocate: <\/p>\n Selecting the right investments <\/p>\n We identify high-quality investments based on: <\/p>\n We often blend\u202fdirect equities\u202fwith\u202factive and passive managed funds, ensuring both performance potential and tax efficiency. <\/p>\n It is well documented that it has been a challenging time for large-cap Australian equity managers, so you want a low-cost tracking error-aware manager, but with the benefit of direct ownership. We still want an active manager as we are worried about the concentration risk of the banks and miners in the Australian market. <\/p>\n Our direct equity sleeve has around 30 holdings, with the top weights being BHP (ASX: BHP<\/a>), Westpac (ASX: WBC<\/a>), Commonwealth Bank (ASX: CBA<\/a>), ANZ (ASX: ANZ<\/a>), and Macquarie Group (ASX: MQG<\/a>). It is important to spread the risk by ensuring no one stock represents too significant an allocation, for example, our biggest weight, BHP, is only 1.74% of the portfolio. <\/p>\n