Managed Account
A managed account is an investment account that is owned by an investor but managed by somebody else. The account owner can either be an institutional investor or an individual retail investor. A professional money manager hired by the investor then oversees the account and the trading activity within it.Armed with discretionary authority over the account, the dedicated manager actively makes investment decisions pertinent to the individual, considering the client's needs and goals, risk tolerance, and asset size. Managed accounts are most often seen among high-net-worth investors.
Definition: A managed account is an investment account owned by an investor but managed by someone else. The account owner can be an institutional investor or an individual retail investor. The investor hires a professional fund manager to oversee the account and its trading activities. With autonomy over the account, the dedicated manager actively makes investment decisions relevant to the individual, considering the client's needs and goals, risk tolerance, and asset size. Managed accounts are most common among high-net-worth investors.
Origin: The concept of managed accounts originated in the mid-20th century as financial markets became more complex and specialized. More investors began seeking professional investment management services. Initially, managed accounts primarily served institutional investors, but over time, individual high-net-worth investors also started using this method to manage their assets.
Categories and Characteristics: Managed accounts can be divided into several types, including:
- Single Managed Account: Managed by one fund manager or investment firm, with the investment strategy and decisions entirely handled by that manager.
- Multiple Managed Accounts: Managed by multiple fund managers, each responsible for different investment strategies or asset classes.
- Customized Managed Accounts: Tailored to the specific needs and goals of the investor, with highly personalized investment strategies.
- Personalized Service: Fund managers create investment strategies based on the investor's needs, goals, and risk tolerance.
- High Transparency: Investors can view the account's portfolio and trading activities at any time.
- Flexibility: Investment strategies can be adjusted based on market changes and investor needs.
Specific Cases:
- Case 1: A high-net-worth individual investor aims for steady asset growth before retirement. They hire a professional fund manager who, based on their risk tolerance and investment goals, creates a diversified investment strategy including stocks, bonds, and real estate investment trusts (REITs). During market fluctuations, the manager adjusts the portfolio to ensure steady asset growth.
- Case 2: A medium-sized company wants to increase the returns on its idle funds through investment. They choose a reputable investment firm to manage their investment account. The firm, considering the company's financial status and risk preference, devises a fixed-income-focused investment strategy and regularly provides investment reports and recommendations to the company.
Common Questions:
- How are the fees for managed accounts calculated? Managed accounts typically charge management fees and performance fees, with the specific fee structure depending on the fund manager or investment firm's standards.
- How do managed accounts differ from mutual funds? Managed accounts offer personalized investment services, whereas mutual funds pool funds from multiple investors and are managed collectively by a fund manager.
- Are managed accounts suitable for all investors? Managed accounts are usually suitable for high-net-worth or institutional investors due to higher management fees and the need for a larger initial investment amount.
