Trading Accounts Offered

Introduction

At Mercer Capital Management we offer our clients a range of trading accounts and investment vehicles.

Below is a brief summary of some of the main ones we offer our clients, how they work and their potential advantages:

Mutual Funds-A mutual fund is a professionally managed investment vehicle that pools the funds of a group of investors for the purpose of investing in securities such as stocks, bonds, and similar assets that would be difficult (if not impossible)to create without a large amount of capital. Individual investors can buy in or sell out of these funds at any time as most are “open-ended”.

Mutual funds have some key advantages compared to direct investing in individual securities. These include:

  • Increased diversification
  • Daily liquidity
  • Professional investment management
  • Ability to participate in investments that may be available only to larger investors
  • Service and convenience
  • Government oversight
  • Ease of comparison

Mutual funds have disadvantages as well, which include:

  • Fees
  • Less control over timing of recognition of gains
  • Less predictable income
  • No opportunity to customize

Hedge Funds

At Mercer Capital Management we offer Hedge Funds which are an aggressively managed portfolio of investments that are for the most part unregulated, due to them only being offered to our most sophisticated, accredited clients. Although in investment terms, hedging means to minimize the risk of losses, a hedge fund uses investment strategies that maximize profit, regardless of if the markets are rising or falling, and as such can carry more risks than the overall market.

A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. They are similar to mutual funds in that they are professionally managed and investments are pooled, but, due to them being mostly unregulated, hedge funds are extremely flexible in the investment strategies they can employ.

It is important to note that hedge funds utilize around 14 distinct investment strategies and not all of them should be considered volatile. For example, some strategies deliver consistent returns with extremely low risk of loss by having no correlation to the equity markets, whilst other strategies do indeed use global macro strategies and place large directional bets on stocks, currencies, bonds, commodities or gold, while using lots of leverage, thus increasing the risk, but also the potential returns, with this is in mind it is very important to understand the fund strategies to be employed and the degrees of risk and return.

Advantages of Hedge Funds

  1. Hedge funds can help to balance a portfolio, reducing overall risk and volatility whilst increasing returns.
  2. A hedge fund can diversify an already strong portfolio in ways not achievable through traditional investment strategies.
  3. Many hedge funds provide a way to generate positive returns in both rising and falling equity and bond markets.

Sub Advised Funds

A sub-advised fund, such as a hedge fund or mutual fund, is one that is managed by a different company other than the one that holds the assets. Sub-advised funds are often smaller versions of larger mutual funds and hold the same stock proportions as the larger mutual fund. When a fund chooses to outsource investment management of the fund it allows them to differentiate their products, build or maintain investment superiority and, at times, penetrate new channels of distribution. Sub advised funds tend to have a high minimum entry level due to outsourcing costs.

Separately managed accounts (SMA)-

A separately managed account is a professionally managed portfolio of assets where the investor holds the individual stocks and shares in their own name as opposed to holding a share in a pooled fund. With an SMA one or more portfolio managers, supported by a team of analysts, operations and administrative staff will make the day-to-day investment decisions for each account. This means the account manager can use their discretion and make investment decisions for one account that different to those made for other accounts. SMA’s used to be available only to affluent investors with access to minimum investments of $500,000 or more. Advances in technology have enhanced SMA provider administration, making them more affordable to the average investor.

Advantages of Separately Managed Accounts

  1. The underlying securities are owned rather than units in a fund.
  2. Some SMA’s allow a certain amount of control over the tax implications of portfolio sales and purchases.
  3. The individual securities in the account are visible and portable, just as they would be if they had been purchased directly.
  4. Owning the underlying securities allows you to transfer managers without selling, which could be an issue in an illiquid market.
  5. SMAs offer one or more model portfolios to choose from so investors are able to create a customized and diversified portfolio of shares. Note however that the day-to-day investment decisions are made by the account manager not the investor. Some SMA’s however allow a greater degree of control over investment decisions to the investor rather than the account manager, but these tend to incur more charges as they take up more of the account manager/financial advisor’s time.