Separately Managed Account Industry Will Grow to 12.5 million Total Accounts by 2011

Forecast for Industry growth released today

At 2003 Annual Conference of The
Money Management Institute

New York, N.Y., March 31, 2003 – The separately managed account (SMA) industry will grow to12.5 million accounts representing $2.1 trillion in assets by 2011, according to a new forecast for managed account industry growth released this afternoon at the 2003 Annual Meeting of The Money Management Institute (MMI), the national organization for the SMA industry.

The industry forecast was developed by Financial Research Corporation (FRC) with the cooperation of the MMI.  Financial Research Corp. is the nation’s leading full service research and consulting firm serving the financial services industry.  The forecast was presented at the meeting by T. Neil Bathon, President of FRC.

The MMI/FRC projection also estimates that the SMA industry, which totaled approximately 2.04 million accounts and $398 billion in assets at year-end 2002, will grow to 5.3 million accounts and $930 billion in assets by 2006.

Managed accounts are individual accounts offered by financial consultants utilizing a broad range of advisory services and are usually managed by professional, independent money managers using an asset-based fee structure.

MMI and FRC developed the projection through analysis of account trend information provided by the MMI membership, which comprises the industry’s leading asset management firms and program sponsors.

In addition to projecting growth in total account and asset levels for the industry over the next decade, MMI and FRC also generated insights into trends such as industry growth by type of firm and sales “channel,” account asset allocations, and changes in average account sizes.

        “Projected growth in total SMA industry accounts offers an unmistakable measure of likely, continuing investor demand for this investment approach,” said Christopher L. Davis, Executive Director of the MMI.  “The trend we foresee for the rest of this decade builds on the emergence of very strong investor interest in SMAs over the past five years.  Our asset base has proven remarkably steady even in the midst of extreme market turmoil, further indicating that our investors have embraced the SMA concept as an optimal long term investment management approach.”

The MMI/FRC study indicates that SMA industry year-over-year net sales of SMAs increased by 181 percent in 2002, totaling approximately $50 billion compared with approximately $18 billion in 2001.

In 2002, large cap equities represented 57 percent of new accounts, while balanced accounts represented 17 percent, fixed income 9 percent, mid cap equities 6 percent, small cap equities 1 percent, and other assets 10 percent.

Mr. Bathon said:  “Multi-disciplinary products (known as MDPs), which employ a multiple asset-class approach, showed especially strong growth in the fourth quarter of 2002, with the total number of accounts increasing by 43 percent and assets growing by 55 percent in 2002’s fourth quarter.”  The average size of such accounts at year-end 2002 was $330,839, he noted.  By comparison, the average SMA account size across all disciplines and account types was $197,000 at year-end 2002.

Notes:
The Money Management Institute (MMI) is the national organization for the managed account industry, representing portfolio manager firms and sponsors of investment consulting programs.  The MMI was created in 1997 to serve as a forum for the managed account industry’s leaders to address common concerns, discuss industry issues and work together to better serve investors. The Institute is the leading advocate for the industry on regulatory and legislative issues. MMI’s membership comprises firms that offer comprehensive financial consulting services to individual investors, foundations, retirement plans and trusts; related professional portfolio management firms, and firms that provide long term services to both sponsor and manager firms such as computer/technology firms.  www.moneyinstitute.com