Separately managed account (SMA) growth in the US has exploded in recent years, with total assets reaching USD3.86 trillion in 1Q 2025 (including SMAs within unified managed accounts (UMAs)), resulting in a two-year increase of 54.1 per cent, writes Cerulli Associates.
Despite this, Cerulli has found many managers are experiencing redemption rates that are much higher than expected and, in some cases, higher than those of pooled vehicles.
The firm writes that SMAs have garnered significant managed account marketshare due to lower minimums, enabling increased accessibility, and wealth managers’ improved ability to handle trading through model delivery. With solutions such as direct indexing, SMAs provide enhanced tax management and personalisation. “The general consensus in the industry is that redemption rates for SMAs would be lower than a pooled vehicle such as an exchanged traded-fund (ETF) or mutual fund,” comments Scott Smith, senior director.
However, Cerulli’s research finds the average redemption rates for equity and fixed-income SMAs to be 21.1 per cent and 15.9 per cent, respectively. While these rates largely are lower than those of mutual funds, 23 per cent of firms say their equity redemption rates are about the same as mutual funds, and 25 per cent say their fixed-income SMA redemption rates match their mutual fund lineup. With just 8 per cent of firms reporting higher redemption rates for their SMAs, it is clear that SMAs are less likely to be redeemed than mutual funds, Cerulli writes.
“The costs for asset managers to open an SMA (e.g., onboarding, marketing) are not insignificant, and managers expect a client to remain invested in that product for a longer time horizon than they are currently experiencing,” says Smith. “Managers must consider this while building out SMAs, focusing on how and where a product can differentiate to meet advisor demand.
Despite higher-than-expected redemptions, Cerulli believes the vehicle is slated for continued success, as demand for personalisation increases and wealth managers seek differentiated offerings to add to their platforms.
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