Managed Account Sponsors and SMA Managers Place Bets on Fixed Income

October 17, 2022 — Boston

Managed account sponsors seek to satisfy demand from advisors and their clients for income solutions within unified managed accounts programs

As income solutions remain the top priority for both financial advisors and their clients, two out of five managed account sponsors identify fixed-income solutions as a product priority, according to The Cerulli Edge—U.S. Managed Accounts Edition.

According to the research, retirement income planning consistently rates as the top service offered by financial advisors, with 88% of practices offering this service to their clients, making the continued evolution of fixed-income separately managed accounts (SMAs) crucial for asset managers. “For end-investors, having enough income in retirement to ensure a comfortable standard of living has been a long-running concern,” says Matt Belnap, associate director. “Asset managers and managed account sponsors would do well to keep this in mind when designing products and implementing those products on their platforms,” he adds.

Most fixed-income separately managed account assets are manager-traded, with fixed-income products consisting of 38% of overall manager-traded marketshare. A much smaller fraction is in model-delivered strategies. On the other side of the ledger, fixed-income strategies make up just 4.2% of overall model-delivered industry marketshare. Sponsor firms generally remain comfortable with manager-traded fixed-income products, with 94% saying that taxable bond funds present either a significant or modest opportunity, and 88% saying the same about municipal bond offerings. “Managed account sponsors are comfortable leaving fixed-income trading and execution in the hands of asset managers with their experienced and substantial trading desks,” says Belnap.

While manager-traded strategies remain in vogue for now, asset managers must continue to evolve their fixed-income offerings to remain relevant in an increasingly competitive marketplace. “Those asset managers that can continue to innovate and make their fixed-income products easier for advisors and sponsor firms to implement stand the best chance of success going forward,” notes Belnap. “Likewise, sponsors should be sure to dedicate the appropriate resources to enhancing their fixed-income capabilities, especially for the trading and execution, which in turn integrates with their continued push toward a UMA,” he concludes.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Managed Accounts Edition, 3Q 2022 Issue.

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