Navigating Your Investment Choices: Separate Managed Account vs. Commingled Funds

While allocating your capital among the vast landscape of investment options is key to crafting a strategic portfolio to achieve optimal returns, it is also very important to select the right platform for your selected investment approach.

Separately Managed Accounts (SMAs) and Commingled / Pooled Funds are two sophisticated platform options frequently considered. Both provide distinct advantages. However, understanding the differences between separately managed accounts and commingled/pooled funds is essential to making an informed choice of a platform that aligns with your financial goals.

Understanding Separately Managed Accounts (SMAs)

Separately Managed Accounts (SMAs) are highly customizable portfolios managed by professional investment firms on behalf of an investor. With an SMA, the investor directly owns the underlying assets, which allows for complete transparency and flexibility. SMA allows personalized investment strategies tailored to an investor’s requirement. At Alchemy, we offer SMA to all types of investors like institutional investors such as pension funds, endowments, and insurance companies, UHNIs, fund of fund etc.

Understanding Commingled Funds

A Commingled Fund pools capital from multiple investors into a single fund, which is managed by a professional fund manager. The investments are made in the name of the fund for the benefit of all the contributors in the fund.

The pooled structure allows investors to access a wider range of investment opportunities that might otherwise be unavailable on an individual basis and are generally considered cost-efficient.  At Alchemy, we have a comingled fund which is available to offer interest to all global investors, including US tax, US tax-exempt, and Non-resident Indian investors.

Key Differences Between Separately Managed Accounts (SMAs) & Commingled Funds

1. Customization & Flexibility:

SMAs offer unparalleled customization. Investors can tailor their portfolios based on individual goals, preferences, or even ESG considerations. This bespoke nature is attractive to those seeking personalized investment strategies. 

In contrast, commingled funds offer a more standardized approach, pooling investments from multiple sources. While customization is limited, investors still benefit from professional management and diversified strategies tailored to broader objectives.

2. Ownership & Control:

With SMAs, investors have direct ownership of individual securities within their portfolios, offering complete control and transparency. This level of visibility allows them to track every asset they own.

Commingled funds, on the other hand, grant no direct ownership. Investors hold units in the pooled fund, giving the fund manager discretion over the underlying assets. 

3. Minimum Investment:

SMAs generally require a higher minimum investment compared to commingled funds, often catering to high-net-worth individuals or institutional investors.

Commingled Funds have lower minimum investment requirements, making them more accessible to a broader range of investors, including retail investors. 

4. Liquidity:

SMAs are generally more liquid. Since the investor owns the individual securities, they can choose to liquidate specific holdings as needed.

Commingled Funds: Liquidity depends on the structure of the fund. For example, mutual funds offer daily liquidity, while hedge funds or private equity funds may have lock-up periods or limited redemption opportunities.

Invest in GIFT City With Alchemy

Alchemy Investment Management LLP’s fund migration to IFSC GIFT City represents a step forward in the country’s goal of becoming a global financial hub. Our investment management services are offered in both Commingled Funds and Separately Managed Accounts:

1. Commingled Fund:

An interested investor looking for actively managed Indian exposure can invest through Alchemy’s pooled investment vehicle. The US dollar-denominated fund is open for subscription to global investors, including Non-resident Indians (NRIs) and OCI certificate holders.

2. Separate Managed Account (SMA):

Alchemy Investment Management LLP is open to providing its portfolio management and advisory expertise to a Separate Managed Account (SMA), where the long-term objective of the investor matches with our investment philosophy. These SMAs are offered to High-net-worth individuals and institutional investors like the Sovereign Wealth Fund, Pension funds, Endowment Funds, Mutual funds, Country Funds, and Fund of Funds.

Kindly write to us at connect@alchemyim.com to know more about our SMA and the commingled fund, Alchemy India Long Term Fund.

Disclaimer: This blog is for informational purposes only and should not be considered as an offer or solicitation to buy or sell any securities or make any investments. We recommend readers take independent advice before making any investment decisions. Please refer to our Disclaimer and Disclosures for more details.