Assets in Managed Accounts Total

$456.29 Billion at End of 2003’s Third quarter:

Quarterly Data from The Money Management Institute

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Industry Assets Shift Strongly to Equities,

Comprising 60 Percent of Total;

Banks Now Hold Largest Average Accounts

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Washington, D.C., October 29, 2003 -- Assets held in separately managed accounts industry-wide totaled $456.29 billion at the end of 2003’s third quarter, according to quarterly figures for account assets under management released today by The Money Management Institute (MMI).

The third-quarter total was up approximately 3 percent from the $442.86 billion recorded at mid-year 2003, and up approximately 18.5 percent from the $384.86 billion recorded at the close of 2003’s first quarter.

The figures are based on a survey of managed account sponsor firms conducted by MMI, whose membership comprises the industry’s leading program sponsors as well as their selected professional portfolio management firms.

                Separately managed accounts (SMAs) 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.

                 The MMI’s quarterly assets under management (AUM) figure is based on program totals reported by the leading distribution firms, including Smith Barney, Merrill Lynch, Morgan Stanley, UBS, Prudential, A.G. Edwards, Bank of New York, Wells Fargo, SEI, Lincoln Financial, Brinker Capital and others, which collectively hold approximately 90 percent of the overall market – in addition to totals reported to MMI by a selection of smaller firms that represent the remainder of the SMA industry.

                MMI’s quarterly survey of industry AUM tracks growth in assets specifically in SMA programs under the direction of financial advisors associated with the industry-leading program sponsors as well as those with other firms industry-wide.

                “Our industry is keeping pace with the general expansion of equity markets this year, and has even exceeded the growth of other investment sectors in comparable periods this year,” said Bruce Aronow, executive vice president, chief operating and financial officer, Rorer Asset Management, LLC.  “The benefits of the SMA approach are evident at all points in the market cycle, helping investors to maintain a consistent investment approach that is mindful of short-term market movements yet focused on long-term financial objectives.”  Mr. Aronow chairs MMI’s oversight committee on industry data and analysis.

SMA Market Exceeds Mutual Fund,

Variable Annuity Growth Rates in Second Quarter

                In addition to assembling the quarterly AUM data, MMI works with Financial Research Corp. (FRC), the nation’s leading full service research and consulting firm serving the financial services industry, on other data initiatives including quarterly analysis and reporting of market-wide asset growth and distribution trends.

               According to the latest FRC analysis, for the quarter ended June 30, 2003, the SMA industry’s 15.6 percent growth rate in 2003’s second quarter bested both mutual funds (14 percent) and variable annuities (10.2 percent) for the first time since 2002’s third quarter.

 Strong Growth in Equity Assets

Creates Advisor Need to Rebalance Portfolios

               This year, exceptional equity market performance along with strong account growth for value-oriented disciplines has generated a significant increase in the equity portion of overall industry AUM. 

               “The recent growth trend for equity AUM means that advisors will be working closely with their clients going forward to rebalance individual accounts for consistency with ongoing asset allocation targets,” said Mr. Aronow.  “This advisory function represents one of the key benefits of the SMA approach.  It’s the role of the advisor to ensure continually that investor asset allocations are consistent with the investor’s long-term strategy.  As changes in underlying asset values shift those allocations from the desired targets, the advisor makes the necessary adjustments to keep the overall portfolio on strategy.”

                Domestic equity’s share of industry AUM increased to 60 percent as of June 30, 2003, from 51 percent on March 31, 2003; in contrast, fixed income dropped to a 14 percent share as of June 30, compared with 20 percent on March 31.

               “During the first half of 2003, advisors supported the increase in the equity portion of the industry’s assets by actively allocating dollars to both the mid- and large-cap value sectors,” said Michael Evans, FRC vice president.

                In this period, AUM in the mid-cap value domestic equity and large-cap value domestic equity sectors grew by 25.5 percent and 18.5 percent, respectively, while the number of accounts in these sectors increased by 4.2 percent and 4.1 percent, respectively.

               “Over the next six to 12 months, the industry should see new dollars transition from fixed income products into equity-oriented disciplines, both domestic and international, particularly if international equity markets continue to stabilize,” Mr. Evans said.

Average Account Size Increases 12.6 Percent;

Banks Hold Largest Average Accounts

               At the industry level, the average account size increased by 12.6 percent in the second quarter, to $236,963 from $210,458.  A number of equity-oriented disciplines achieved even larger increases quarter to quarter, including small cap value (30 percent), small cap growth (27 percent), global equity (21 percent) and large cap value (20 percent).

               Both the bank and third party distribution channels have significantly larger average account sizes than the industry average.   As of June 30, average account size was $294,584 for banks and $274,386 for third party platforms, compared with the industry average of $236,963, and $224,617 for wirehouse programs and $220,952 for regional firms.
           Banks also have shown the largest increase in average account size, with the average account growing 8.9 percent over the year ended June 30, compared with 2.8 percent growth for accounts in the regional channel, 2.2 percent for the wirehouse channel, and 0.1 percent for the third party channel.

Third Party, Bank Platforms

Build Market Share

              While wirehouse firms remain the dominant distribution channel for SMAs, banks as well as third party platforms are steadily building market share.  Over the year ended June 30, third party and bank platforms increased their market share of separate account assets by 1.6 percent and 1.4 percent, respectively, while the Wall Street company channel experienced a 3.5 percent decline in share.

              “The increasing success of banks in this business reflects the initiative of institutions like ours to deliver a comprehensive product mix -- including separate accounts – that is highly competitive with the offerings of full service broker dealers,” said Jerome Paolini, senior vice president, director of the investment consulting group, Wells Fargo.  “Because banks have historically held a significant level of high net worth assets, we have a huge opportunity to transition our clients into separate accounts.”

                Increased adoption of separate accounts by independent advisors has driven growth at the third party platforms.  While mutual funds remain the core component of the typical independent advisor’s client allocations, according to FRC research, advisors currently utilizing separate accounts plan to increase their allocation over the next several years.  In addition, a significant percentage of advisors that currently do not utilize separate accounts plan to do so in the future.

               “Our independent advisors are increasingly offering sophisticated SMA programs to their clients and do so fully on a par with their peers at the large Wall Street institutions,” said Robert Dineen, CEO and president, Lincoln Financial Advisors.  “Advisors are taking advantage of SMAs to enhance dramatically the scope and value of their role as providers of comprehensive wealth management services – services that today more and more high net worth individuals are demanding from every advisor channel.”
 

Notes:

The Money Management Institute (MMI) is the national organization for the separately managed account industry, representing portfolio manager firms and sponsors of investment consulting programs.  MMI was organized in 1997 to serve as a forum for the separately 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