Comparing Separate Accounts with Mutual Funds:
Separate Account Performance
Warning! Mutual funds may be hazardous
to your financial health.
Separate accounts offer potentially higher return.
Separately managed accounts have the capability to significantly outperform
This is especially true in the volatile market we have experienced since 2000.
During this period, the average mutual fund lost value and distributed 9 percent average in capital gains. This brought it home to high net worth investors that mutual funds are less efficient because each fund is forced to carry high reserves anticipating redemptions from other nervous investors.
The fund manager, therefore, has to juggle buying when the market is high and redeeming when the market is declining. This affects all investors in the fund and performance suffers.
With the freedom from maintaining cash reserves and predictable flows from other investors not an issue, separate accounts have better potential for achieving better returns than mutual funds. This is especially true when separate accounts utilize the expertise of top grade money managers covering the progress of the portfolio.
Less Tax Pain with a SAM
Even with higher fees (researcher acknowledges fees would probably be lower if done again in 2004), the well-run separate account puts more money in the investor's pockets.
Excerpt from Stop Wasting Your Wealth in Mutual Funds: Separately Managed Accounts—The Smart Alternative
Chapter 7—Performance: Questionable Returns
or Unquestionably Better Returns
- Funds usually under perform the market.
- High fees hinder performance returns.
- Built-in capital gains reduce performance returns.
- There is no unnecessary tax burden.
- Investor has hands-on security maneuverability.
- Structure potentially allows better ROI