Despite the tough market environment of the last 12 to 18 months, the separately managed money segment of private client investment services is still growing at a healthy clip and is expected to rise even more rapidly over the next few years, according to Merrill Lynch

With market conditions expected to improve in early- or mid-2002, and with the level of wealth continuing to grow at or near double-digit rates, industry-wide separate account assets are projected to more than double to more than US$650 billion by year-end 2005, according to the brokerage firm.

“The outlook for the separate accounts market is excellent,” said Robert Dineen, head of Merrill Lynch’s managed assets group in the U.S. “Client demand for our separate-accounts service looks strong well into the foreseeable future.”

Separate accounts offer access to institutional-class asset management, investment customization and high tax efficiency for an asset-based fee. Total assets in managed accounts (including separate accounts and managed mutual fund accounts) shot up by 5.5% in the 2001 second quarter, rising to US$403.1 billion from US$382.1 billion, according to the Money Management Institute, the separate accounts industry trade association.

Separate accounts growth has remained strong despite substantial market turbulence, with the S&P 500 index dropping by 20.39% by the end of September and total mutual funds assets declining by 3.3% as of the end of August.

“The areas that most industry observers feel will be key to winning in the separate accounts marketplace in this defining decade are: more in-depth training in separate account marketing and management for financial advisors; strong due diligence in monitoring and overseeing asset managers; and building deeper back-office and technological support systems,” said Dineen.