Trading and rebalancing on a Separately Managed Account (SMA) Model Portfolio

For any additional SMA application orders, if they are placed before 12pm (Sydney time) via Adviser Online, the appropriate trades will be placed based on the target SMA weights for the next business day. Each application for a new SMA must be placed for the minimum as indicated in the applicable SMA PDS and AIB.

Equity orders are settled two days after execution, whilst managed fund application will be priced on different days (depending on the fund). 

Certain funds may take longer to price and settle if they are non-daily priced funds. Please check the Non-Daily Priced Fund schedule for redemption timeframes.

Please note, one business day must be added to stated Wrap timeframes and cut-offs when estimating managed fund timeframes and cut-offs for SMAs.

Certain activities may affect an application, these include: 

• Corporate actions
• Managed fund pricing when distributions are being paid
• Existing buy or sell orders in progress.

*Number of business days.

Rebalances are made when any changes to the SMA weightings are submitted by model managers. In addition to model changes, SMAs are reviewed and, if required, rebalanced at the beginning of each quarter.

Regular quality assurance checks are also completed on a more regular basis, where SMA accounts are monitored for high/low cash positions or significant stock deviations.   

When an SMA is rebalanced, underlying accounts are reviewed and re-aligned with the desired SMA weights. Where a client’s holdings vary from the targeted SMA weights beyond a specified tolerance, trades will be generated for those securities.

All models are set up with a trade tolerance level. These are set to limit small trades that would increase complexity and cost to clients. When reviewing client accounts where the variance between client holding and the targeted model portfolio is less than this specified trade tolerance, the variance will typically be considered as immaterial, and no trades will be generated. 

Certain client activities such as an application or redemption order will trigger an entire account review, generating trades for securities outside of tolerance. This will account for accrued distributions, model weighting drift, and can lead to trading on an account to bring it within the tolerance level. Dividends and distributions are generally considered immaterial and so do not trigger a client account review.   

For your SMA tolerance, please contact the Investment Manager. 

You are able to perform the following switches within the SMA product:

• Super to Pension - Partial and Full SMA Switch
• Pension to Super - Partial and Full SMA Switch
• Pension to Pension - Partial and Full SMA Switch.

If the account holds an SMA, this will need to be switched separately and may take additional time to complete. For further information on switches please refer to Switching from Super to Pension account.

If an asset within an SMA is frozen or suspended, it will remain as part of the SMA portfolio and the underlying asset allocation. 

If a redemption is placed during the period in which it frozen or suspended, the redemption will be processed as soon as the asset is re-opened for redemptions. 

All assets within an SMA will have tax reporting on a first in first out basis.  

For further information on wrap tax elections please see the article Tax elections.

Dividends are paid as cash into the SMA cash account. Dividends will be reinvested across the SMA portfolio during the next rebalance. 

Advisers can also set up SMA income election on a client level to redirect income from the SMA account to the main Wrap cash account. This is done on the Wrap portal.