Details
Smartleaf is a provider of software, model management, hosting and data services that support overlay portfolio management (OPM). We make it possible for you to holistically manage customized open-architecture portfolios at scale.
What is Overlay Portfolio Management?
Overlay is an approach to portfolio management where every account replicates – with adjustments for tax, expenses and customization criteria – a blend of one or more model (idealized) portfolios provided by investment analysts. Operationally, overlay separates research (market-beating ideas expressed in the form of model portfolios) and customization (tax management, social criteria constraints, etc). With overlay, there are no sub-advisors, only the overlay manager. This contrasts with traditional Separately Managed Account programs (SMAs), where discretion is shared among multiple money managers, each of whom acts a sub-advisor, responsible for trading a sub-account. With traditional SMA, the client’s assets go outside the firm; with models-based overlay, assets remain in-house and ideas (in the form of models) come in.
Overlay lets you take advantage of the best investment research available while making it easy to customize your clients’ portfolios for individual tax management, risk management and specific investment selections. The efficiency of overlay makes it feasible to simultaneously increase customization and consistency.
The overlay approach makes it possible for you to offer clients a true Unified Managed Account — to combine multiple security types (equities, mutual funds, ETFs, ADRs, individual fixed income instruments, etc) in a single, unified account, taking advantage of any combination of proprietary and third-party manager research.
How Smartleaf works
The basic idea is that for each portfolio:
- You create a “target,” a hypothetical portfolio representing what you would buy for a client if they started with cash and no restrictions. Typically, there are roughly a dozen targets per firm (or per portfolio manager), categorized by risk profile (aggressive growth, conservative, etc).
- You specify any customization criteria you want to apply. This includes “never buys,” “never sells,” tax & expense management preferences, and minimum trade size.
Every day Smartleaf analyzes the portfolio and recommends trades to keep the portfolio as close to its target as possible. All trades are consistent with your customization and tax parameters.
Why Smartleaf is simple to implement and operate
100% of Smartleaf’s implementations have been successful. This is due to the simple and non-invasive architecture of Smartleaf integrations.
- Integration is limited to:
- A daily upload from your system of record.
- An export from Smartleaf of a trade file to your trade management system.
- There is no need for a reconciliation process.
- Smartleaf is offered as a hosted service with a full disaster-recovery capability. No new software resides on your premises.
- None of your other systems depend on the Smartleaf system.
