Separately Managed Account
A portfolio of individual securities managed by a professional specifically for a single investor.
What is SMA?
A separately managed account (SMA) is a professionally managed portfolio of individual stocks, bonds, or other securities owned directly by a single investor — unlike a mutual fund or ETF, where investors hold shares of a pooled vehicle. SMAs offer advantages unavailable in pooled structures: tax-loss harvesting on individual positions, exclusion of specific stocks (ESG screens, concentrated position avoidance), and direct ownership visibility. Minimum investment thresholds are typically $100,000–$250,000. SMAs are most appropriate for high-net-worth investors where the tax customization and direct ownership benefits justify the higher minimums and fees compared to equivalent index funds.
Example
A tech executive with $500,000 to invest in a large-cap equity SMA asks the manager to exclude the company they work for (to avoid overconcentration) and any oil and gas companies. The SMA holds 40 individual stocks tailored to these constraints. At year end, the manager harvests tax losses on three positions, generating $18,000 in capital losses to offset gains elsewhere in the executive's portfolio — a customization impossible in a shared mutual fund.