Multi-Discipline Account

What Is a Multi-Discipline Account?

A multi-discipline account refers to a managed investment account that can be accessed by multiple investment managers with different specializations. These are composed of a number of sub-accounts — each overseen by a different fund manager with relevant expertise. Multi-discipline accounts provide investors with an efficient means to a diversified, professionally managed portfolio.

How Multi-Discipline Accounts Work

Multi-discipline accounts exist to achieve a diversified portfolio without the need to maintain multiple separately managed accounts (SMAs), which can be impractical and costly. These accounts — also called multi-style or multi-strategy accounts — allow individuals to invest their money in a single account that is divided into different asset class categories.

The minimum investment for a multi-discipline account may be as much as $150,000. Investors confer with the firm to divide their capital between different sub-accounts or sub-categories. These individual segments are accessible by different investment managers who bring different areas of expertise and investment strategies to the table. These managers are free to invest their clients' money as per their investment profiles and goals — just like they would do with individual accounts.

Although they employ a separate manager for each sub-account, multi-discipline accounts use overlay managers to oversee entire portfolios. This individual is able to guarantee that the account meets consistent asset allocation and coordinates the overall investment strategy. Having one manager oversee the entire account also streamlines performance reporting.

Advantages of Multi-Discipline Accounts

The main advantage of one of these accounts is the initial investment required. A conventional managed account normally requires a minimum investment of $100,000. For a multi-discipline account, this investment requirement may be as low as $10,000 and as high as $150,000, so even the average retail investor can access one.

The minimum requirement for a multi-discipline account may be as low as $10,000 and as high as $150,000.

Example

Let's say an investor wants to divide their assets among four separate strategies — for instance, large-cap growth, large-cap value, international growth, and dividend strategy. The investor would need at least $400,000, and that assumes a plan to divide assets equally among all four strategies. Being able to commit and put down this much capital may be difficult and frustrating. Compare that to the option of a single, multi-discipline account that encompasses four sub-accounts. It requires less money to start and allows the investor to split assets asymmetrically.

Multi-Discipline Accounts vs. Separately Managed Accounts (SMAs)

Separately managed accounts have become popular among high net worth investors (HNWIs) looking for an instrument with more individual attention than comes with a mutual fund. Like a separately managed account, and unlike a mutual fund, a multi-discipline account allows investors to advantage of the specific-shares method, as each lot of shares purchased comes within an individual cost basis. A separately managed account gives an individual retail investor the benefit of customized portfolio management, something a pooled vehicle cannot offer.

But the minimum investments tend to differ between these two types of accounts. While multi-discipline accounts have a lower entry threshold, separately managed accounts may require a higher minimum investment. An HNWI may have no problem meeting the investment minimums necessary to set up multiple SMAs, but that doesn’t render the virtues of a multi-discipline account moot.

Whatever their investment minimums, multiple separately managed accounts come with the confusion inherent in chopping up a portfolio among multiple managers with no coordination. This confusion can mean having shares of the same stock in different accounts or in one account selling the stock that another account is buying. Further, with multiple SMAs, it is more of a chore to determine exactly how an investor’s portfolio is performing overall.