Gwyn Roberts

17/02/2010 Author: Gwyn Roberts

Fanning the flame of managed accounts 

A bright idea doesn’t burn forever. And with new entrants jostling to enter the managed accounts space, many in the hedge fund sector are gambling that last year’s Eureka moment is not about to sputter out. Fortunately, for the sector’s neophytes, it appears that new investors – 23% according to the latest Preqin data – are still keen on segregating their assets.

What the research doesn’t make clear is the type of platforms that will ultimately gain business. While the old guard, in the form of Lyxor and DBX, have operated at the sophisticated end of the market for years, providing portfolio management skills for investors and distribution for hedge funds, the new breed appears to be offering a more no-frills service.

Sticking to just risk management and valuation means cheap – approximately 40bps compared to 75bps – but it doesn’t necessarily mean nasty. In fact, for many investors managed accounts are now more about due diligence than portfolio management. Investors, says Preqin, want better validation of assets. Something that all platforms can provide and all investors, according to some, can now afford.   

Yet, whatever the price, many still regard these vehicles as unnecessary adornments. Preqin’s research shows 38% of investors are still deterred by cost. And with flagship funds making their own huge leaps in portfolio transparency, it remains to be seen if the managed account flame will burn as brightly in 2011.

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