Magazine article American Banker

Managed Account Assets Fell in 3Q; Popularity Didn't

Magazine article American Banker

Managed Account Assets Fell in 3Q; Popularity Didn't

Article excerpt

Managed account assets fell in the third quarter, according to data released today, but industry analysts say this does not dim the product's growth prospects.

Assets in separately managed accounts declined 5.6%, to $392.57 billion at Sept. 30, compared with the second quarter, according to quarterly data from the Money Management Institute, a Washington-based trade group that tracks the accounts. The decline since Dec. 31 was just 1.8%.

Christopher L. Davis, the institute's executive director, said the third-quarter retreat was due entirely to market performance. During the quarter, the Standard & Poor's 500 index fell 9.3%. Domestic mutual fund assets dropped 8.3%, according to the Investment Company Institute.

Despite a difficult quarter in the market, Mr. Davis said, companies reported opening new accounts and closing very few; few clients even cashed out portions of their managed accounts, he said.

"Clients who are using managed accounts are sticking with their long-term objectives," he said.

Mr. Davis said that despite the third-quarter results 2002 has been a successful year for managed accounts because large financial institutions, including banks, have started programs and existing programs have grown.

"More firms are making a commitment to making managed account work," he said. "They are doing everything they can, from changing compensation payouts to drawing more advisers to sell the product."

Some of the large wirehouses, including Prudential and Merrill Lynch, have raised their payouts to financial advisers who sell managed accounts, he said.

"They are increasing awareness, they are increasing training, and they are altering compensation," Mr. Davis said. "They are holding up managed accounts as the best product their firm has to offer, and investors are responding, and institutions are offering the product. …

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