Separate Account

A separate account is a segregated accounting and reporting account held by an insurance company not in or "separate" from its general account. A separate account allows an investor to choose an investment category according to his individual risk tolerance, and desire for performance. An account may be a generic conservative or aggressive investment allocation, or a specific mutual fund-type account. Some offshore companies allow the account owners to specify the type of separate account to open.

Separate accounts in the U.S. markets are often characterized as either managed or non-managed. A managed separate account is synonymous to a mutual fund in the sense that the investments of the separate account are actively managed (such as stocks, bonds or other debt instruments, loans, derivative instruments, etc.). A non-managed separate account is one that invests more "passively" in that it typically owns shares of other managed pools of investments such as mutual fund shares. This is similar to a "fund of funds" whereby the separate account ("fund") simply invests in shares of one or more mutual funds. This arrangement is sometimes more efficient and cost-effective rather than the insurance company maintaining many separate accounts with similar baskets of securities.

Separate accounts are sometimes confused with separately managed accounts (SMAs), which are privately managed investment accounts opened through a brokerage or financial adviser that uses pooled money to buy individual assets. These differ from mutual funds because the investor directly owns the securities instead of owning a share in a pool of securities. Most SMAs require a minimum investment of $100,000 or more.


Famous quotes containing the words separate and/or account:

    As usurpation is the exercise of power, which another hath a right to, so tyranny is the exercise of power beyond right, which no body can have a right to. And this is making use of the power any one has in his hands, not for the good of those who are under it, but for his own private separate advantage.
    John Locke (1632–1704)

    Then he looked up at his disciples and said: Blessed are you who are poor, for yours is the kingdom of God.
    Blessed are you who are hungry now, for you will be filled.
    Blessed are you who weep now, for you will laugh.
    Blessed are you when people hate you, and when they exclude you, revile you, and defame you on account of the Son of Man.
    Bible: New Testament, Luke 6:20-22.