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MUTUAL FUNDS |
MANAGED ACCOUNTS |
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GENERAL FEATURES |
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Access to professional money managers |
Yes |
Yes |
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Diversified Portfolio |
Yes |
Yes |
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Ability to customize portfolio |
No |
Yes, investors can restrict specific securities
from their portfolios |
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Manager independence from the "herd instinct" |
No, if clients want to redeem shares, fund managers
must sell to raise the cash to do so |
Yes, money managers can buy when the herd is selling
and vice versa, customizing the decision to the client's objectives
|
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Unlimited withdrawals/redemptions |
No, most funds have
restrictions |
Yes |
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Typical account minimum |
$1,000 |
$100,000 |
|
Liquidity |
Typically, next day |
Three-day settlement of trades |
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Access to asset classes |
Numerous |
Somewhat more limited than funds |
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PERFORMANCE REPORTING FEATURES |
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Performance reporting |
Typically semi-annual, some more frequent |
Quarterly performance rating |
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Customized performance reporting |
No, investors must calculate their own performance,
which is problematic, particularly for investors who dollar cost
average |
Yes, automatically sent to investors every quarter,
includes performance of individual portfolios and of aggregate of
multiple portfolios |
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TAX-RELATED FEATURES |
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|
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Separately held securities |
No, investor owns one security, the fund, which
in turn, owns a diversified portfolio |
Yes, investor owns securities in an account managed
by their money managers |
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Unrealized gains |
Yes, average US mutual fund has a 20% imbedded,
unrealized capital gain 1 |
No, cost basis of each security in the portfolio
is established at time of purchase |
|
Customized to control taxes |
No, most funds are managed for pre-tax returns,
and investors pay a proportionate share of taxes on capital gains
|
Yes, investors can instruct money managers to take
gains or losses as available, to manage their tax liability |
|
Tax-efficient handling of low cost basis stocks
|
No, stocks cannot be held in an investor's mutual
fund account, so there is no opportunity to manage low cost basis
stocks |
Yes, the handling of low cost basis stocks can be
customized to the client's situation, liquidating in concert with
offsetting losses, etc. |
|
Gain/loss distribution |
Virtually all gains must be distributed, losses
cannot be distributed |
Realized gains and losses are reported in the year
recorded |
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COST-RELATED FEATURES |
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|
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Expenses (excluding brokerage costs) |
1.42% 1,3 |
1.00% |
|
Expenses (including brokerage costs) |
1.56% average 2,3 |
1.25% 3 |
|
Volume fee discounts |
No, all investors pay the same expense ratio |
Yes, larger investors enjoy fee discounts |
|
Other costs |
12b-1, sales loads, redemption fees, etc. |
None |
