Most times, if you are hiring a money manager, it is to run something called a “separate account.” It is “separate” from other pooled monies, such as mutual funds and hedge funds, and is instead managed to the owner’s general specifications.
Separate accounts differ from traditional funds because you, the investor, will own the securities yourself, rather than having a share in a big investment pool. Say the XYZ Fund has big stakes in Coca-Cola and PepsiCo, and you believe after a taste-test that Coke is finally going to wipe out Pepsi.
The fund would not allow you to reduce your exposure to Pepsi, since the manager can’t make decisions based on the preferences of one investor. In a managed account, however, the money manager could dump the Pepsi and double down on Coke, if the strategy is in keeping with your goals.
In reality, money managers probably don’t want that kind of input from customers, but the point is that the portfolio is customized to you, rather than to a mass of somewhat like-minded shareholders.
As a general rule, separate accounts require a minimum initial investment of $100,000 or more, but there are now some brokers and planners looking to get into the business by accept small accounts, so that you may be offered the service by someone trying to build a practice and willing to oversee your $25,000 or $50,000 account.