Separately managed accounts (SMAs) have realized more growth than any other investment products in the past two years, according to new research released today from Hearts & Wallets.
SMAs saw the most growth among the top 10 investment products over a two-year period, from 13% in 2020 to 22% in 2022. Adoption particularly grew among high-income households, and nearly doubled in households with over $3 million in investable assets (22% in 2020 to 41% in 2022). Wealthier households with SMAs have also recently allocated more to the funds, with 29% in 2022 compared to 22% in 2020.
“SMAs, direct indexing and other new wrappers hold great promise for individual investors and the industry,” Laura Varas, Hearts & Wallets CEO and founder, said in a statement. “More individual investors are putting money into SMAs, and those who already own them are increasing their allocation to this product type. Conversely, the stagnation of mutual funds requires board-level attention.”
Stagnant TDRF balances
Data from Hearts & Wallets finds that while target-date retirement funds (TDRFs) have the potential to become an income stream later in retirement, the funds tend to have low balances among investors. Eighteen percent of households report owning TDRFs, while 13% are unsure whether they own the funds or not. Of those 18%, over three-quarters (77%) report balances of less than $100,000.
“Much work remains to be done to demonstrate whether TDRFs with income streams can be an effective solution to our national retirement security issues,” added Amber Katris, Hearts & Wallets Subject Matter Expert and report co-author.
Crypto use soars
Despite its controversy towards risk, cryptocurrency use has more than doubled in the past two years, going from 9.4 million households in 2020 to 19.4 million in 2022. Younger adults were also likelier to invest in the asset, as three out of four crypto users are under the age of 45. Additionally, these users were likely to “strongly agree that missing out on a possible growth opportunity is a bigger worry than losing money in the short-term,” according to Hearts & Wallets.
Top 10
The top 10 investment products, as recorded by Hearts & Wallets, includes:
| Investment Product | % increase/decrease | 2022 HH % Owned | 2020 HH % Owned |
| SMAs | +9ppts | 22% | 13% |
| High-yield savings | +4ppts | 38% | 34% |
| Exchange-traded funds (ETFs) | +2ppts | 18% | 16% |
| Individual stocks | +1ppt | 43% | 42% |
| Individual bonds | +1ppt | 22% | 21% |
| Fixed annuities | +1ppt | 19% | 18% |
| Robo advisors | +1ppt | 10% | 9% |
| Certificates of deposit | no change | 27% | 27% |
| Variable annuities | no change | 12% | 12% |
| Mutual funds | -1ppt | 38% | 39% |
The Investment Products & Asset Managers 2023: New Wrappers, Multi-Asset Solutions & Reaching More Shareholders to Power Growth report by Hearts & Wallets analyzes individual investor holdings of investment products, household allocation of investable assets, and asset manager leaders. The report analyzed 123 million U.S. households with at least $100 in assets.
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