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Glossary · Structures

What is a separately managed account?

A separately managed account is an arrangement where a manager invests one investor’s money alone, to terms that investor negotiates, instead of in a pooled fund.

In practice

The account is usually governed by an investment management agreement and guidelines rather than an LPA. The investor typically owns the assets directly or through a vehicle it controls. Fees are often lower than in a pooled fund, and the investor may set reporting, liquidity and exit terms. An SMA is often confused with a fund-of-one, which is a legal fund entity with a single investor.

An example

Round numbers, not a real fund

Say a pension plan gives a manager $500 million in a separate account. The plan sets the limits on what it can buy, and nobody else’s money is in it.

Why it matters

It gives large investors control over terms and holdings, and managers a steadier relationship.

A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.