A separate account (SA) is an investment portfolio of stocks, bonds, cash, etc. following a defined strategy and managed by a professional money manager.
The holdings in the portfolio are directly owned by the investor and have their own cost basis.
Although the money manager may oversee hundreds –if not thousands- of SMAs, each is separate, distinct, and owned by one investor.
Like having your favorite mutual fund manager pick stocks and bonds for your brokerage account
Asset management firms offer different strategies, just like mutual funds, such as Large Cap Growth
SAs are also known as separately managed accounts (SMAs), wrap accounts, private accounts, managed accounts, individually or separately managed accounts. Usually, a SA refers to an investment strategy owned by an individual (or retail) investor.
SAs are NOT the accounts established by a life insurance company, separate from their general accounts, for investments in non-guaranteed insurance and annuity products. (and referred to by the SEC as “separate accounts”)
SAs are NOT mutual fund wrap accounts. Wrap accounts invest in mutual funds, so apart from varying the percentage invested in various funds, the holdings of the mutual funds cannot be adjusted.
SAs are unregistered investment vehicles, like hedge funds. Mutual funds, by contrast, are registered investment vehicles.
What registration means is that an investment vehicle, like a mutual fund, is registered with the SEC/FSA, etc... and is compelled by law to disclose monthly performance and portfolios. That is not the case with separate accounts.
Morningstar covers both separate accounts (SA) and collective investment trusts (CIT)
For the sake of simplicity we refer to “separate accounts” but cover both:
Separate account composites
Cover institutional, high net worth, and separately managed account (SMA) platform composites
Collective Investment Trusts (a.k.a. Commingled or Collective funds)
Used in defined benefit (pension) plans and defined contribution (401k) plans