Introduction to Separately Managed Account

Introduction to separately managed accounts

What is a separately managed account?

A separately managed account (or sometimes called segregated mandate) allows investors to appoint a manager that customizes a portfolio of direct securities on their behalf. This provides investors flexibility to maximize returns according to their own guidelines.

Why separately managed accounts?

One size no longer fits all  

  • Client needs have evolved due to increased regulation, low or negative yield environments and increasingly sophisticated investment policies.
  • Increased understanding of cash segmentation has led clients to seek better outcomes for their non-working capital.

How is a portfolio set up?

Know your cash

Segmentation is important, as it allows organisations to categorise their cash according to their liquidity needs, investment objectives, and time horizon. Based on your cash forecast analysis, there may be three types: working capital, core cash and strategic cash.

Know your cash

Source: BlackRock, as of January 1, 2021. For illustrative purpose.

Each portion of cash may have different objectives. Working capital could be surplus revenue generated from your operating activities, which would require same day liquidity to meet your daily requirements. Thus, conservative guidelines aiming for capital preservation and operational ease may best suit your needs.

Core cash could be raised for a corporate action like a merger and acquisition. You may need to allow a slightly longer horizon and some flexibility on risk exposure. In this segment, you may need access to some of your cash but will look to generate returns as well.

Strategic cash would usually be used for preparing long-term projects such as infrastructure renovations. Given the cash is not expected to be accessed regularly, such portion could have the longest investment horizon with a focus on optimizing returns.

Each portion of cash may have different objectives

Define your parameters

A separately managed account gives you flexibility over many characteristics of your portfolio including:

  • Investment guidelines
  • Allowable investments
  • Liquidity needs
  • Benchmark
  • Minimum credit quality
  • Duration
A separately managed account

Interested in discussing separately managed account opportunities? Contact us today.