Separately Managed Accounts


Separately managed accounts can play an important role in an investor's strategy because of the special benefits they offer, albeit at higher investment minimums. These customizable investment vehicles are designed to help investors reach individual and specific financial goals by combining the benefits of professional money management with the added flexibility, control, and tax advantages of owning individual securities.

A separately managed account is a portfolio of securities directly owned by the investor and managed according to a specific discipline and/or style by a professional investment manager. Account owners have the ability to customize their accounts by excluding certain securities or industries, or employing tax-advantaged strategies. Many separate account programs also offer the feature of including mutual funds within the separately managed account to further customize an investor's portfolio.

  • Professional Portfolio Management: Separate account programs provide investors with access to leading portfolio managers who in the past may have exclusively managed very large private and institutional accounts. In addition, since these programs are offered only through investment professionals, financial advisors are there to provide individualized monitoring of portfolio manager performance.
  • Portfolio Customization: Separate accounts can be tailored to meet individual investors' needs — focusing on risk tolerance and long-term investment objectives. Investors can specify certain parameters to customize their accounts, such as excluding certain securities or sectors, due to social, political or environmental concerns, and managing the portfolio to help reduce tax liabilities.
  • Individual Security Ownership: Ownership has its privileges: investors own each individual security held in a separate account. Sell decisions are made by portfolio management based on the investment strategy, and are not affected by the redemption needs of anyone except the individual account owner.
  • Tax Advantages: When investing through a separately managed account, investors pay taxes only on the capital gains that they actually realize. Individual securities in the account are owned directly, allowing investors to work with their tax advisor and financial advisor to implement tax-efficient investing strategies. In addition, some separate accounts provide flexibility in funding. Separately managed accounts can typically be funded with securities in kind, as well as cash. Many investment advisors will accept securities or portfolios, such as trust and retirement accounts, to fund the account.

SMA vs. Mutual Funds


Separate Accounts

Mutual Funds

General Features

Account Minimum Often at least $100,000 (at Dreyfus, $100,000 for Equity Portfolio. Dreyfus Municipal Bonds Separate Account Series national portfolios require a $300,000 minimum and state-specific portfolios require a $500,000 minimum.) Often as little as $1,000
Access to Professional Money Managers Yes Yes
Number of Holdings Varies depending on asset size, asset class and investment strategy. Varies depending on asset size, asset class and fund objective.
Portfolio Customization Available. Investors can restrict specific securities or industries from their accounts. Not available
Withdrawals/Redemptions Unlimited Allowed. However, many mutual funds have restrictions and some may charge related fees.
Liquidity Depending on the securities redeemed, trades may take up to three business days to complete. Typically, money is available next business day (although redemptions may take up to seven business days).

Tax-Related Features

Security Ownership Investors own each individual security within an account. Sell decisions (and possible capital gains consequences) are based on the investor goals, and are not affected by the redemption needs of anyone except the individual account owner. Investors own shares in a fund, which in turn owns the individual portfolio of securities. Significant redemptions or high turnover activity can potentially produce unexpected taxable distributions at year end.
Unrealized Capital Gains Capital gains may be realized or else harvested for future realization, depending on investor needs and manager strategy. Mutual funds must pass on 98% of all realized capital gains to investors (or pay a 4% federal excise tax) each year.
Tax-Efficient Portfolio Customization Investors can sell securities, creating specific tax consequences; for example, to offset capital gains with capital losses. Not available, although some funds are specifically managed for tax efficiency.


Account Statements Investors typically receive in-depth monthly statements. In addition, investors have access to a Dreyfus Advisor. Investors typically receive in-depth monthly or quarterly statements.


Total Expenses One asset-based fee covers all separate account program services (including asset management, trading and custody) May be subject to sales charges and/or distribution and servicing (12b-1) fees.
Fee Discounts Certain investors may be able to negotiate lower management fee rates than other investors. All mutual fund investors in the same fund/share class pay the same expense ratio.

This information is general in nature and is not intended to constitute tax advice. Please consult your tax advisor for more detailed information on tax issues and for advice on your specific situation.