Dynamic Hedge has a funny article about how messy the investment process is. That’s especially true for investors in separately-managed accounts (SMA). While the SMA has tax advantages over a mutual fund, and sometimes expense and return advantages, the SMA is also inherently messier because clients can see the trades. Often clients interpret a few losses as evidence that a manager is ineptly thrashing around in the market. In fact, as Dynamic Hedge points out, the whole investing process is like a sausage factory. You might like the end result-RS strategies had really, really nice numbers last year-but you might not like to watch the sausage being made. We think that the SMA vehicle is very worthwhile, but you might need to avert your eyes now and then. Give the portfolio manager a break, eh?
Source: Dynamic Hedge
