Today's technology has democratised investing, providing everyday Australians access to investment options previously only available to higher net worth individuals or institutional investors.

From accessing technology or bond markets through ETFs, to international share markets, to the relatively new option of managed accounts, millennials are taking advantage of this increase in choices.

Passive investors can track a range of local and international indexes or benchmarks, while active investors can choose a managed fund or managed account that trades on their behalf to try and beat benchmarks over time.

Investors who are interested in accessing both can also find products that combine strategies. For example, smart beta combines passive and active approaches.

Regardless of whether you are a passive or active investor, a choice that you might be considering is whether to outsource the management of your portfolio to an investment manager or choose specific stocks or exchange traded funds (ETFs) yourself.

The benefits of relying on an investment manager include leveraging the manager's research and expertise, which may lead to avoiding unnecessary risks and maintaining diversity in your portfolio.

Managed accounts - an alternative to managed funds

Investors can access investment management expertise via a range of structures, most notably via managed funds and, more recently, managed accounts.

Regardless of structure, managed accounts and managed funds may be comprised of domestic equities, ETFs, international equities, and managed funds (a fund of funds), plus use a combination of styles that might be passive, active or a mixture.

Typically, they reflect investment themes, strategies, skills, and experiences of the investment manager. For example, one investment manager may offer an investment portfolio that only invests in passive ETFs, whilst another may only invest in ASX200 equities.

In managed funds, the investor's money is pooled together with others to buy and sell investments within the fund and investors effectively share in the value of the underlying assets.

In managed accounts, separate holdings are acquired for each investor and they are provided with beneficial ownership of each of the underlying assets. This can make it easier for investors to see how the individual asset is performing.

"Managed accounts, as a structure, have definitely grown," says Pinnacle Investment Management's head of retail, Ramsin Jajoo.

"One benefit of managed accounts is that you can inject advice into the service offering by having a managed accounts program that is professionally managed, targeting needs and aspirations."

Netwealth's joint managing director Matt Heine is also seeing a growing number of millennial investors access managed accounts directly.

"A big part of the growth in managed accounts has just been the availability of investments within them," he says. "Rather than just being direct equities, managed accounts can now cater for all of those asset types, whether it's managed funds, equities, ETFs, international equities, or in some cases, other managed accounts."

Heine describes managed accounts as one of the fastest-growing products on Netwealth's platform, with appetite from a broad cross-section of the market. Smaller balance retail investors can access managed accounts made up of ETFs, whilst for the ultra-high net worth clients, managed accounts can be customised to something more bespoke.

Jajoo says technology has made it very easy for young investors to judge the performance of different options.

"I believe there's never been a greater time in the history of mankind for investors to judge value."

The passive alternative

A third option attracting young investors is ETFs, which allow investors to follow an index or benchmark of their choice, sometimes at a lower cost than a managed fund or managed account.

Research from ETF provider BetaShares shows young investors are attracted to the transparency and low cost associated with this investment option.

Betashares CEO Alex Vynokur says he has seen more interest in ESG and technology options from the millennial market. The BetaShares/Investment Trends ETF Report 2020 found 28% of millennials favoured socially responsible investment, compared with 20% of investors overall.

As millennials show an appetite for these markets, Vynokur says it's important that the market adapts to meet their needs. For example, the company has recently launched an ETF that gives exposure to global companies fighting for climate change, while another provides access to the cloud-based computing industry.

"These provide access to the growth potential of what we see as long-term global megatrends and are already proving to be of interest to Australian investors," he says.