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In our "Separate Ways: Behind the Evolution of Managed Accounts" report exploring how hedge fund managers incorporate separate managed accounts (SMAs) into their strategies, we provide a comprehensive overview of the rapidly evolving landscape. Our report is based on data collected from a survey of hedge fund managers conducted in partnership with Hedgeweek. SMAs have emerged as a critical tool for hedge fund managers and investors seeking greater transparency, customization and operational control.

The Correlation Between Scale and SMA Adoption

Our survey data highlights a significant correlation between fund size (measured as Assets Under Management or AUM) and SMA adoption. This relationship underscores the operational and resource requirements necessary for managing separate accounts effectively. Here's what the data reveals:

• Larger Funds Lead the Way:
  • $13bn+ AUM: 100% of managers in this category offer SMAs.
  • $650m-$1.3bn AUM: 90% have SMA offerings.
  • $1.3bn-$6.5bn AUM: 75% offer SMAs.
• Smaller Managers Face Challenges:
  • Funds managing $30m-$120m showed a 58% adoption rate, while only 40% of those <$30m offer SMAs.

The operational complexity and resources required are clear barriers for smaller funds. However, the report indicates that declining costs and technological advancements are steadily lowering these barriers, fostering wider adoption across smaller managers.

Additionally, technological improvements have democratized access to SMA infrastructure. Enhanced platforms enable even sub-$125m managers to implement SMA programs, tailoring offerings to attract institutional and family office investors.

Regional Variations in SMA Adoption

Regional disparities in SMA adoption highlight varying market dynamics, regulatory environments and investor preferences across major geographies:

• North America:
  • 63% of managers currently offer SMAs.
  • A growth trajectory is evident, with 20% planning to introduce SMAs within the next 12 months.
  • Key drivers include favorable regulatory environments and mature market structures, enabling seamless implementation.

• Europe:
  • 54% of managers provide SMAs, with only 6% planning to adopt them within the next year.
  • Challenges include tighter regulatory scrutiny and slower adoption among institutional investors. European allocators often face hurdles in convincing boards and regulators of SMAs' feasibility.

• APAC:
  • Although only 3.2% of survey respondents operate in Asia-Pacific, the data suggests growing interest. 50% of respondents from APAC currently offer SMAs, with rising demand from family offices favoring transparency and control.

These regional trends underscore the importance of tailoring strategies to specific investor needs and regulatory frameworks.

The Road Ahead for SMA Adoption

Declining infrastructure costs, advances in technology and evolving investor expectations are likely to expand adoption across mid-sized and smaller funds globally. However, managers must carefully consider operational demands, particularly as they scale or enter new regions with varying regulatory landscapes.

For institutional investors and family offices, SMAs offer a pathway to greater transparency, risk control and capital efficiency. Managers unwilling to adapt to these evolving demands risk losing their competitive edge in a rapidly changing investor-driven hedge fund industry.

This evolution showcases the dual importance of innovation and strategic planning, ensuring that both managers and investors can fully leverage SMAs' potential to generate long-term value. Read the full "Separate Ways: Behind the Evolution of Managed Accounts" report to learn more.