I logged into the smaller of my Mom's new accounts for the first time since we started investing with a certain manager of separately managed accounts. Separately managed accounts are similar to mutual funds but the funds are not pooled - instead of owning shares in the fund you own the actual shares directly. This gets around the negative tax issues associated with traditional open-ended mutual funds. In traditional funds you pay the pre-tax net asset value of the fund for a share in the fund. When you buy shares in the fund might have tax liabilities due to selling stocks or receiving dividends during the year before you bought in. You have to pay these taxes when at the end of the year capital gains and dividends are distributed to you even though you didn't benefit from those gains or dividends. Also, when investors redeem shares the manager has to sell stocks generating capital gains whose tax liabilities are distributed to all shareholders. The flipside is that growing funds like TFS Market Neutral tend to have lower tax liabilities. Anyway, none of these issues apply to separately managed accounts.
But what surprised me is that when I logged in I saw all the individual stock positions in the account just as if it was a regular investment account. This is an excellent manager, and I'll probably get some investment ideas for myself by checking out their picks.
4 comments:
Just make sure your accountant doesn't charge by the page. The sheer number of Schedule D entries in such an account .. expect a 30+ page filing.
Interesting point. I don't deal with my Mom's accountant directly I just oversee the investment side of things. But she isn't in the US, I don't know the reporting requirements in her country. In Australia for example the capital transactions part of a tax return only has about three lines, none of this Schedule D nonsense one has in the US, because among other things there is no wash sale rule. The tax report for the accountant will be generated by the broker in her country. My Schedule D for 2006 will be more than 200 lines long... but I prepare it myself. 2007's will be shorter due to my shift to futures trading.
mOOm, I am a bit surprised you didn't know the ins and outs of SMA's. Yep, you get to see it as it happens. Most of these guys will also set you up with e-mail alerts every time they make a change. Do some exploring.
Hi Stealthbucks
It's only in the last couple of years that I heard of these SMAs which are marketed somewhat like mutual funds with fund names. I knew that in a traditional SMA you could see all the positions. My parents used to have them before 2002 with some UK stockbroker (who was crap). Turns out that the name of the fund there on these new generation SMAs (I think this account is called "growth" and there is also a "value" etc. ) doesn't make any difference to this. In retrospect that's obvious I guess. Now I know.
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