Why managed accounts are the new gateway to fixed income

This is particularly relevant at a time when the bank hybrid market is being gradually phased out in Australia. Investors who would have simply rolled from a maturing hybrid into a new one are now left looking for new investment ideas. There are other options available - however which is best for providing predictable, high-quality income streams or cashflow and repayment of invested capital? 

The Gap in the Market

Historically, in Australia direct access to high quality fixed income assets such as syndicated loans, investment-grade corporate bonds, and structured credit has largely been reserved for institutional investors with deep pockets and dedicated research teams. Private investors were left with managed funds or ETFs that often-lacked transparency, offered pooled or unitised ownership and limited ability to specifically tailor allocations.

Some financial advisers have also faced challenges of delivering scalable, high-quality fixed income exposure when they have had little experience and expertise in selecting and overseeing a portfolio of individual debt securities and investments. Some have found a solution in paying an additional fee for a fixed income CIO service. IAM’s Income MDA solves this dilemma.

Why MDAs Are Attracting Investment

According to the Institute of Managed Account Professionals (IMAP), managed account FUM was $232.77 billion as of 31 December 2024, up from $188.85 billion the year before[1]. The reasons for this – MDAs provide investors the following benefits:

· Transparency and direct ownership: A managed account provides access to a professional manager and its research capability with the benefits of direct ownership. Unlike a managed fund, you can see exactly what investments are in your portfolio, including acquisition costs, market value and accrued interest.

· High quality investments: Portfolios are typically focused around high-conviction positions, with the total number of holdings in the model limited to 20-30 securities, whereas in a managed fund there can be dozens or hundreds of positions.

· Flexibility and proactive portfolio management: Allocations can shift dynamically in response to market conditions, issuers and macro shifts, optimising returns while managing volatility.

The Fixed Income Advantage in an MDA Structure

MDAs enable the combination of traditional investment-grade bonds with alternative yield sources like syndicated loans and private credit. This creates:

• Diversification: Exposure across sectors, geographies, and credit types.
• Yield Optimisation: Targeted strategies that adapt to rate movements and credit cycles.
• Professional Oversight: Portfolios are managed by seasoned credit specialists and investment committees, ensuring professional management and a disciplined approach to risk.

At IAM, we believe that private investors deserve access to the same high quality fixed income alternatives as professional investors. While some investors are comfortable managing their own fixed income exposures, we know that others will also value the professional management overlay that comes with an MDA. That’s why we’ve developed a managed account that offers ownership of a curated portfolio combining investment grade bonds with bank syndicated loans.

Unlike typical “private credit” offerings, the loans we offer our clients and will use in the MDA, are lender-friendly, offer superior liquidity, and yield c.2% above comparable bonds. Combining these exposures in an MDA along with more traditional investment grade bonds provides a compelling, lower-risk alternative to direct Private Credit strategies.

The Income MDA is backed by a top-tier investment committee led by industry experts James Simpson and Danielle Press. James Simpson is a co-founder of Platinum Asset Management, leads his own family office and is soon-to-be chair of IAM, and Danielle Press is an IAM Director, a former ASIC Commissioner and ex CEO of both EquipSuper and The Myer Family Office and Managing Director at UBS Global Asset Management.

You can find out more about the Income MDA here.