Separately managed accounts, or SMAs, are becoming an increasingly important route into hedge fund strategies as institutional investors seek greater transparency, control, and flexibility.
Rather than investing through a commingled vehicle on standard fund terms, investors can use an SMA to hold a dedicated account, set mandate parameters, and receive direct reporting on how capital is deployed.
The structure is straightforward. An SMA holds assets for the investor rather than in a commingled pool. The investor sets the mandate, sees the positions, and retains greater control over liquidity. For institutions concerned with governance and redemption risk, that distinction matters.
What investors now expect
Historically, hedge fund reporting was often delivered monthly, sometimes weeks after the period had closed. Today, allocators increasingly expect more frequent updates and more timely visibility into positions, risk, and exposures. They expect to know what they hold and why before the quarter closes. The shift goes beyond reporting frequency.
Allocators are no longer satisfied with alpha alone. They want a say in how it is generated: which strategies run on their behalf, which counterparties are used, and where the risk limits sit. A segregated account lets them shape the portfolio rather than simply buy into one. It also lets them screen for their own priorities, whether that is an ESG mandate or a fiduciary obligation, and negotiate fees that reflect the size and shape of the mandate.
That control can extend to tax preferences, ESG screens, and concentration limits, as well as counterparty selection, risk overlays, or carve-outs that reflect the investor’s mandate. The investor base is broad, from large institutions to family offices and high-net-worth individuals, each with its own reasons to want a tailored structure.
Liquidity as a baseline
Liquidity used to be something a manager offered as a selling point. For many institutions, it has become a baseline part of mandate design. Allocators need liquidity terms that reflect their own portfolio requirements, where the underlying strategy allows it. A segregated account can offer more flexibility than a pooled fund because it is not automatically tied to the redemption schedule of a wider investor base. Custom liquidity terms, aligned to the total portfolio rather than a pooled fund's calendar, are now part of what allocators ask for at the outset.
A new wave of demand
Private wealth is also contributing to demand, particularly among family offices and younger investors who want more tailored portfolios and better digital visibility. They are designing portfolios rather than buying funds off the shelf, and SMAs give them room to do it.
Managers are seeing the demand from their side too. An SMA can bring stickier, more stable capital, less exposed to the herd redemptions that hit pooled funds. It can also provide a route to anchor investors and institutional credibility, without requiring a manager to stand up a full fund from day one. For emerging and mid-sized firms in particular, the ability to offer a managed account has shifted from a useful option to something allocators expect before they will commit capital.
Where adoption stands
Take-up has followed scale. The largest managers moved first, because they already carried the operational base an SMA setup needs. Smaller firms have lagged, held back by the cost and effort of running bespoke accounts. That gap is narrowing as technology becomes more capable and external service models make SMA infrastructure easier to access.
The picture varies by region. North America is furthest along, helped by a supportive regulatory setting and deep institutional demand, with Europe a step behind, subject tighter regulatory scrutiny and allocators who often need more convincing at board level. Across Asia-Pacific, interest is building, led by family offices that value transparency and control. The direction is consistent, even where the pace differs.
Why the operating model decides it
Transparency only helps if you can act on it. Many allocators have found themselves data-rich but insight-poor, receiving far more information than their teams can process. The strongest programmes are built around the decisions the data is meant to support, with repeatable processes and external capacity where internal teams are stretched.
Managers face the mirror image. Running one bespoke account may be manageable. Running multiple accounts across different mandates, reporting requirements, and risk limits is a very different exercise. That means daily reconciliations, accurate valuation, custody oversight, counterparty coordination, and reporting that can be tailored by client, mandate, and jurisdiction.
There is also a regulatory dimension that is easy to underestimate. Depending on the jurisdiction and structure, SMAs can affect a manager's registration, reporting, and compliance obligations. Unlike a traditional fund structure, administration and oversight arrangements may need to be designed specifically around the account. The burden of getting that right sits with the manager.
This is why the operating model, not the offering itself, has become the real point of difference. Access to the structure is no longer rare. The ability to run it well at scale is.
How can we help?
We support the operating model that hedge fund SMA platforms depend on, bringing administration, middle-office services, custody oversight, regulatory reporting, and investor transparency into one framework. Investors get the visibility and control they are asking for, while managers keep their attention on strategy rather than infrastructure.
In practice, that means more automated workflows, less manual handling, consolidated service delivery, and reporting aligned to allocator requirements. As requirements around reporting, account-level transparency, and tailored mandates develop, SMA platforms will need operating models that can adapt without adding unnecessary internal burden.
If you are considering an SMA structure or want to understand what it would take to set one up, our hedge fund team can help assess the operating model, reporting requirements, and support needed to run it at scale.
Please contact our hedge fund team to discuss your SMA requirements.
