The Markets March 9, 2011

Managed Account Industry to Shift from SMAs to UMAs

Managed accounts software provider Peridrome found an expected increase in the adoption of models-based distribution and newer products in a recent survey.
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More than 120 investment managers, sponsors and outsourcers responded to the 2011 Managed Accounts Executive Outlook, and said that the shift away from separately managed accounts (SMAs) will present challenges to SMA managers, but will provide a windfall of opportunity for outsourcers, emerging sponsors and Turnkey Asset Management Programs (TAMPs) that successfully navigate the new business landscape.     

The company said traditional SMAs will continue to play a significant role in the managed solutions industry.  While sponsors do not expect to increase their traditional SMA assets, only 27% expect their use of these products to decline.     

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Increased traction of Unified Managed Account (UMA) programs may be driven by large sponsors expanding platforms by adding managers new to managed accounts. Investment managers (IMs) with established SMA products are less likely to see UMA as a growth opportunity than smaller IMs who now can expand into UMA through model delivery without the operational barriers associated with traditional SMA.   

According to Peridrome, respondents continue to cite servicing client requests as the least scalable aspect of their operations.  Technology will continue to play a vital role as assets shift from traditional SMAs toward models delivery, UMAs and innovative investment vehicles.  Existing workflow technologies may not provide enough of an advantage to change this perception.
Compliance March 9, 2011

Wisc. Man Diverted $1.3M from Profit-Sharing Plan

The U.S. Department of Labor (DoL) sued Coin Builders LLC of Wisconsin Rapids and its president, Joseph Kreeger, to restore more than $1.3 million plus interest to the company’s profit-sharing plan.
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A news release said the lawsuit alleges that Kreeger improperly transferred $1.3 million in plan assets to a Coin Builders LLC bank account.  Kreeger also allegedly handled plan assets without being bonded as required by the Employee Retirement Income Security Act (ERISA).

The suit seeks a court order to restore money owed to the plan, correct transactions prohibited by law, remove Kreeger and Coin Builders LLC from serving as fiduciaries to the plan, and permanently bar them from serving as fiduciaries to any ERISA-covered plan in the future. 

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It also asks the court to appoint an independent fiduciary to terminate the plan and to distribute the plan’s assets to eligible participants and beneficiaries.

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