Managed (or 'separate') accounts are portfolios chosen by a money manager for an investor and held in the investor's own account. The money manager does not have access to the portfolio assets, but instead has limited discretion to execute transactions on behalf of the investor. The main difference between managed accounts and mutual funds is that while mutual fund investors hold shares representing a stake in an overall portfolio, they do not actually own the securities in that portfolio.

But because a managed-account investor owns the stocks and bonds outright, the holdings can be tailored to match that investor's particular financial needs. Customization can involve asset allocation parameters, excluding particular stocks or industry sectors from an account, and tax planning such as timing trades to maximize tax benefits.

Most savvy private investors want their investments to reflect their goals and objectives as closely as possible. The potential efficiencies of participating in a group or pool pale when compared to the investment and service advantages of a privately managed account. Pooled investments simply cannot achieve the important level of customization of private account service, communications, tax considerations, and investment selection.