SMAs have experienced explosive growth recently, rising by over 54% to $3.86 trillion in assets, according to a “U.S. Managed Accounts” report for the first quarter of 2025 from Cerulli Associates. However, the firm’s research also showed that the average redemption rates for these accounts reach into the double digits, higher than the asset managers behind them anticipated.
Asset managers have been launching managed accounts at a rapid rate over the past two years, anticipating a high level of demand from financial advisors. This summer alone, Edward Jones doubled the number of SMAs on its platform, while private credit fintech Percent launched its first SMA focusing on private credit. Previous research from data analytics firm Escalent showed that advisors were favoring SMAs over model portfolios because of lower fees and greater ability to customize, while Morningstar found that assets in SMAs had grown by close to 70%, to $500 billion in just a year and a half between the start of 2023 and mid-year 2024.
A 2025 Cerulli survey of asset management executives found that the average redemption rate for equity SMAs is 21.1% and 15.9% for fixed-income SMAs. While those figures tend to be largely in line with or lower than redemption rates for mutual funds, asset managers have told Cerulli in interviews they are still much higher than expected. This presents a challenge because opening an SMA typically incurs a considerable cost for them.
Asset managers surveyed by Cerulli expected investors to stay in SMAs for 10 to 20 years, which is not an unreasonable expectation, according to Scott Smith, senior director of advice relationships at the firm. The reality turned out to be closer to five years, he said.
Partly, this might be tied to persistent market volatility over the past six years. While financial advisors try to make decisions for their clients based on a long-term outlook, clients can get spooked quickly when there is a market selloff like this April, when stocks dropped by 10% over a few days, Smith said.
“Asset managers saw [SMAs] as long-term investing relationships because it’s more complicated to liquidate 100 or 200 or 300 individual stocks than to liquidate a mutual stock or an ETF. So, it seemed like those assets would be of a long-term nature,” he said. “But when it comes down to advisors actually using them in the field, they run up against these short-term market disruptions or short-term client needs, and find that the holding periods aren’t as long as they expected moving into them. Advisors are trying to make the right decisions for their clients, but client needs are not always something you can anticipate beforehand. Everything is so dynamic now.”
In Cerulli’s survey, 76.9% of asset managers reported that redemption rates for equity SMAs were lower than for mutual funds, and 66.7% said that redemption rates for fixed-income SMAs were lower than for mutual funds. About a quarter of respondents (23.1% for equity SMAs and 25% for fixed-income SMAs) said the redemption rates were similar to those for mutual funds. Only 8.3% reported that redemption rates were higher for fixed-income SMAs than mutual funds, and virtually nobody said they were higher for equity SMAs.
Data collected by Zephyr from its Plan Sponsor Network, shows that year-to-date, SMAs in the PSN U.S. Equity universe experienced outflows of 2.67%, or over $204 billion. (Zephyr, like WealthManagement.com, is owned by Informa and part of the firm’s Informa Connect Global Finance division.)
That’s despite delivering solid returns, according to Nick Williams, product manager at Zephyr. Outflows were the highest in PSN U.S. Equity Growth category (down 4.2%) and PSN Global Equity category (down 4.23%). Zephyr’s PSN analyzes SMA account data from over 2,800 firms and over 21,000 products.
On the U.S. fixed-income side, Zephyr’s PSN data showed a 1.59% year-to-date increase in inflows, amounting to $123.7 billion, despite lackluster results, according to Williams. PSN Core Fixed Income and PSN All/Variable Maturity universes saw the highest inflows, at 4.87% and 4.35%, respectively.
In the long term, Smith said he expects SMAs to continue growing in popularity among financial advisors because they tend to be cheaper than mutual funds or ETFs, offer more tax benefits and provide a greater ability to customize. Cerulli’s research shows that 72% of surveyed asset managers named broadening distribution to new channels as their top priority in 2025, while another 44% were focusing on launching new investment vehicles. However, as the use of SMAs broadens, the redemption rates might rise even higher than they are today, Smith said.
“They may be even a little bit more rapid as advisors start incorporating SMAs into edge cases where they may have used an ETF or mutual fund previously,” he said. “It’s not a ton of extra work for them, even though it may be for the operations side or the client’s CPA when they go to file their taxes after one of these transactions, and they have 300 redemptions from individual stocks.”
Cerulli’s data was based on a survey of asset management executives at 28 of the largest firms in the industry, administered in the first quarter of 2025.
