Abstract
The separately managed account (SMA) business for retail investors has grown from less than $200 billion in assets under management a decade ago to nearly $700 billion today. According to Mintelfs forecast and other estimates, this number is expected to top the $1 trillion mark in the next four years. Behind this growth are primarily high-net-worth investors seeking enhanced performance and customization. Working with an advisor, investors have a considerable degree of freedom to customize a separate account, which cannot be done with a traditional mutual fund portfolio. A classic analogy that is often used to describe SMAs is custom-tailored clothing. Whereas a mutual fund is akin to an "off-the-rack" suit, an SMA is designed to meet individual customer requirements.
As demand for this custom approach has grown, the landscape of providers is changing. The separate account business has traditionally been dominated by large brokerage firms, the so-called wirehouses, which invented the concept in the 1970s. While these firms still control more than 79% of the market, new entrants such as banks, discount brokers, mutual fund firms, and insurance companies are embracing the business. Along with these new participants, new products are being launched as well. Multiple Discipline Accounts, for example, offer the ability to employ the basic SMA concept in a more diversified manner. | 
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