Separately Managed Accounts (SMAs)
Global Founders Funds Management
A separately managed account (SMA) is a customised share portfolio where the assets are owned by individual investors. In the case of GFFM, the client's investment is composed of the model portfolio of globally listed founder stocks and an allocation to cash determined by the portfolio team. The model portfolio is provided to the investment administration platform where the individual investor portfolios are implemented and maintained to mirror the model portfolio.
Any change in the model portfolio will result in corresponding changes in each of the SMAs that are assigned to the strategy. Model portfolios are based on mark to market valuations so each account regardless of its age maintains the same proportion of each holding. Additions or withdrawals generally result in proportional purchases or sales across the securities in the model portfolio, maintaining the model weightings.
As investors maintain beneficial ownership, their tax positions reflect their actual purchases and sales and are not influenced by the actions of other investors. Similarly, investors may transfer their holdings to another investment managers or custodians without incurring a tax event. Most investment administration platforms will also allow existing direct holdings to be transferred into the investment program without incurring a tax event – although this can generally only be done with holdings that are already in the investment portfolio and to the proportion they comprise of the model portfolio.
Management fees are withdrawn directly from the cash component of the portfolio.
Key Structural Advantages
There is no embedded tax liability within an SMA structure and investors do not realise tax consequences as other investors enter or leave the strategy. As assets are not pooled, the actions of other investors do not affect other investors.
Investors can transfer in an existing portfolio without having to liquidate all positions and potentially incur capital gains tax consequences – although only to the extent and proportions the investments are contained in the model portfolio.
Investors may terminate the manager and leave the scheme without being forced to liquidate the positions and incur tax events. Transparency in structure allows assessment of the manager’s transactions, holdings, tax efficiency, fees & expenses, and sources of return. Investors may restrict or exclude transactions or holdings in specific securities. Realised capital losses can be utilised to offset capital gains realised elsewhere.