Assets held in separately managed accounts grew steadily in the first quarter, and banks continued to expand their share of the market.
The Money Management Institute said its quarterly data showed growth of 12.5%, to $590.1 billion of assets under management in the product, from the year earlier. Asset growth from the fourth quarter was a moderate 2.4%. Managed account assets at March 31, 2004, were $524.3 billion.
Banks' share of assets in the product grew to 7.4% at Dec. 31, from 6.7% at Sept. 30, according to the Washington trade group. Wire houses still dominated the market, however, with an 80.2% share, up from 79.3% at the end of the third quarter. However, the institute forecast that the wire house share would shrink to 61% in three to five years as banks, regional firms, third-party marketers, and insurance companies gain.
Kevin Osborn, an executive vice president in Prudential Investments' managed accounts consulting group, said banks' continued growth in share in a market that is growing says a lot for the future of managed accounts and other fee-based products in the bank channel.
"Banks are accelerating in an accelerating market," he said.
Banks' interest in offering fee-based products like managed accounts has broadened in the past five years. Cerulli & Associates, a Boston research firm, has said that three of the top five managed account providers are banking companies.
Merrill Lynch & Co. was the No. 1 provider, with 20.8% of the managed account market at Dec. 31, Cerulli said; it had $246.2 billion of assets under management. Citigroup's Smith Barney was No. 2, with 20.1% and $237.9 billion of assets; UBS Financial Services was No. 4, with 8.3% and $97.8 billion; and Wachovia Securities was No. 5, with 6.7% and $79.4 billion.
Mr. Osborn said the fact that banks continue to gather share in managed accounts reflects both growing consumer interest and recognition by wealth managers at banks that complementing their existing investment styles can help them gather assets.
"There is a pent-up demand," he said. "There are large amounts of assets that were in proprietary products at banks that are" being moved into managed accounts.
The Newark, N.J., investment services arm of Mr. Osborn's company has established relationships with two banking companies, PNC Financial Services Group Inc. in Pittsburgh and Wachovia Corp. in Charlotte. Prudential Investments has more potential banking customers in the pipeline, he said, and expects to announce more deals with banks this year.
Mr. Osborn said in an interview last year that the real opportunity in the marketplace is with banks that manage $5 billion to $50 billion of assets.
Last year 31% more managed accounts were opened. The Mid-Cap investment style drove much of this growth, rising 211% during the year. Numbers of multidisciplinary accounts - a package of investment styles - grew 190% last year.
The Money Management Institute projects that multidisciplinary accounts will keep gaining share as established advisers continue to invest in them.
Mr. Osborn said the persevering double-digit growth of assets in the product, even in a choppy market, is a strong indicator for managed accounts.
