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Managed Accounts

Separate account programs combine the benefits of professional money management with 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.  In this case, the discipline is well-secured corporate and municipal issues versus issues typically found in mutual fund accounts.  We will not purchase bond mutual funds for your account at any time, since we consider that an entirely separate type of product with the advantage of liquidity offset by the risks of bond fund redemptions forcing the sale of bond investments at unfavorable prices by the mutual fund company. 

Separately managed accounts have  a very important distinction from mutual fund bond accounts.  During a temporary period of poor performance in the fixed income markets, mutual funds many times are forced to sell bonds at low prices and pass the losses onto account holders, due to pressures from bond fund redemptions.   This condition does not exist with separately managed accounts, since the securities are entirely owned by the one account holder; and,  not a pool of investors with different time lines or risk preferences (i.e. interest rate risk).  This condition is especially important during periods of time when rates are low and could potentially rise at some point.  In this case, the bonds can merely be held to maturity with no loss to principal.

In addition, mutual funds primarily hold unsecured bonds for their clients since these are how the large corporate issues they purchase for clients are typically structured.  These bonds perform very poorly when there is any negative news in the market about the issuer or interest rates, since the bond is rated based on the issuers ability to pay and not on the collateral securing the bond.

Liquidity- Mutual fund money is generally available the next business day. With separately managed accounts, the trades may take up to three days to complete.