SMA Fees Methodology

SMA Fees Methodology

 Separately Managed Accounts (SMAs)

Separately Managed Accounts (SMAs) are portfolios of investments across a range of assets including shares and managed funds that are managed by a professional investment manager.  The manager seeks to maintain a target level of risk – thereby simplifying the ongoing management of the portfolio for the adviser.

Each SMA has its own Product Disclosure Statement (PDS) which will outline the product strategy and risk profile, as well as fees and costs. In AdviserLogic we rely on Morningstar’s data to capture fees and costs related to SMAs.

 

Composition of Investment Fees

In AdviserLogic the following components are considered in calculating the Investment Fees for SMAs:

 

Investment Management Fees & Costs

The investment management fee is a percentage-based fee paid to the SMA Manager for designing and managing the composition of the portfolio.

 

Performance Fees & Costs

Performance fees may be applicable where the SMA Manager exceeds specified performance targets.  Additionally, where the investment managers of any underlying funds in the SMA portfolio charge a performance fee, this may be categorized as an Underlying Performance Fee.

 

Indirect Costs

The costs that the SMA may incur due to investing in underlying managed funds or exchange-traded funds.

 

Cash Fees

The fee that the SMA Manager charges for additional tasks associated with managing Cash Holdings in the model portfolio.

 

Transaction & Operational Costs (Explicit)

Transactional and operational costs may arise from trading activity within the SMA Portfolio to execute the relevant fund's investment strategy.  

 

Please Note

  • Some providers include Performance Fees, Indirect Costs, and Cash Fees under the Investment Management Fees & Costs
  • Cash Fees are not included in Cash Account Fees charged by the provider for managing Cash Account.
  • At present we are unable to show the breakup of Investment Fees in these components.

Investment Fees =

Investment Management Fees & Costs + Performance Fees & Costs + Indirect Costs + Cash Fees + Transactional & Operational Costs

Example

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IMF – Investment Management Fees

PF – Performance Fees

ICR – Indirect Costs

T&O – Transactional & Operational Costs

CF – Cash Fees

 

Why Can’t I Recommend an SMA?

For recommendations through Digital Advice and for comparisons in  Advice Tools (Super Fees and Platform Fees), SMA fees are based on the configuration set in Digital Advice.

Morningstar is actively engaging with SMA providers to report on key metrics including asset allocation and fees.  Currently, 143 SMAs are covered in our database and this number continues to grow.  However, some SMA providers prefer not to supply this data and are not available to be selected unless added as a custom product.

Why can’t I see the underlying fees for an SMA?

As above, in some instances, the SMA will be available for recommendation however the fee will be missing. 

This occurs when a product that is not in the database has been added to AdviserLogic via a platform Datafeed.  In these instances, the product will be added to the database and available for selection as a recommendation despite no fee data supporting it.  Users can configure the fee at a platform level in Digital Advice settings.

 

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