Money Management Institute

1
Money Management Institute April 20, 2004
The Evolution of Unified Managed Accounts
By Lawrence Sinsimer Senior Vice
President Managing Director-Managed Accounts
2
Generation 1 all proprietary managers example
Citibank MDA
Generation 2 all related outside
managers example MSP, CDP-Eaton Vance, CDC,
AMG, etc.
Generation 3 best of breed no related
managers with overlay manager example ISAM
SEI, Lockwood, Morgan Keegan, UBS-DRS Smith
Barney IIS
For Professional Use Only
3
The Good News
Works great for the Tax-qualified investor Preset
asset allocation automatic rebalance
The Bad News
Doesnt address needs of HNW investor
Wash sales may be eliminated but
Multi-manager strategies face trading/taxes from
five sources
Search for Alpha
Rebalancing
Style Drift (benchmark reconstitution)
Manager Changes
Security and Cash Flows
For Professional Use Only
4
Tax-efficiency a definition ...

• Tax-efficiency means
• Avoiding all unnecessary taxes, and
• Deferring all unavoidable taxes
• Investment income-related taxes, and
• Gift and transfer taxes

For Professional Use Only
5
The Goal of the Ultra High-Net-Worth Investor

• Preservation of capital

• Preservation of purchasing power

• Minimization of taxes

The Role of the Overlay Manager

• Attempt to provide superior returns to the
  passive index
• on an after-tax basis with lower risk by
  providing active
• tax-management

For Professional Use Only
6
A new portfolio structure for HNW Investors
Active Tax Management
Muni Bonds
A
High Pretax Alpha Strategies
Hedge Funds
bar bell solution can produce
some tax-efficiency and some alpha
High Tax- Efficiency Strategies
High Yields
Private Equities
Active Equities
For Professional Use Only