FundQuest, a Boston unit of BNP Paribas SA, expects 30% asset growth in the coming year within the unified managed accounts it provides.
But Tim Clift, its chief investment officer, admits a portion of that growth is likely to come out of the traditional, separately managed accounts that FundQuest also provides.
"Part may come from cannibalizing SMAs," he said, "and the rest will come from new assets."
FundQuest's expectation lines up with some experts' predictions that unified managed accounts, which evolved from managed accounts a few years ago, are set for a growth spurt partly because of their advantages over conventional managed accounts.
Through the end of March, unified managed account assets grew 9% from the same period a year earlier, while the total managed account industry had a 28.8% decrease, according to Cerulli Associates, in Boston.
Cerulli projects that unified managed account assets under management, which recently stood at $49.1 billion, will rise to $190 billion by the end of 2011 and $350 billion by the end of 2013.
As investor assets come off the sidelines, "the UMA has a much better proposition for the client" compared with conventional separately managed accounts, said Jeffrey Strange, associate director with Cerulli.
Banks have been steadily warming up to unified managed accounts. In June, BB&T Corp. became the latest big banking company to roll out a unified managed account platform; it plans to transfer all its equity assets under management onto the platform.
Unified managed accounts face a big growth opportunity in part because they are an alternative to the types of accounts in which many investors took a huge hit last year, Strange said.
FundQuest's Clift agreed. "Separate accounts got beat up last year from an asset and performance standpoint," he said. "That's opened the door a little bit to UMAs."
One reason is that separate accounts often allow for just a couple of investment strategies unless investors put more than $1 million into them. Unified managed accounts allow greater diversification even for investors with as little as $250,000, Clift said.
"UMAs have proven themselves to maybe have a little better structure, and maybe be a little bit more cost-effective, too," he said.
Unified managed account providers tout the product's superior tax management and diversification capabilities, as well as their ability to use active and passive investment approaches, to offer things like retirement and absolute return strategies and to include alternative investments. Meanwhile, unified managed account providers have been adding features meant to appeal to investors who suffered in last year's markets. Curian Capital, a Denver unit of Jackson National Life Insurance Co., introduced a defensive strategy in its unified managed accounts toward the end of last year.
It added alternative investments as an asset class in January, and a tactical asset management product in April. Just last week, it added an option that gives investors up to $2.5 million of federal deposit insurance coverage by spreading their holdings throughout multiple banks, said Chris Rosato, Curian's senior vice president for strategic development.
FundQuest has also been expanding its unified managed account options to include those with lower correlation to the stock market; earlier this year it added some "hedge fund-style mutual funds," as well as commodities and global debt investments, Clift said.
Banks are adopting unified managed account platforms in part to be able to offer "blended architecture," in which the bank's personnel manage one investment style within the account, and complementary styles are outsourced partly or wholly to third-party managers, said Todd Smurl, an independent consultant for wealth management firms.
A second reason is that the unified managed account infrastructure enables banks to easily integrate managed assets that they gain through acquisitions of other banks or asset management shops, he said.
Though unified managed accounts are making inroads into the bank world, bank brokerage units have proven easier to crack than their trust businesses, Clift said.
"Broker-dealers have been pretty quick to adopt UMA structures," said Clift, whose company has 122 clients, about a third of them banks. "The bank trust side has been harder to capitalize on."
The culture of the trust department is such that its officers are reluctant to give control of their clients' assets to an outside party, he said.