The hedge fund industry is undergoing a significant transformation driven by a decisive shift in how institutional investors and family offices think about their capital. At the center of this change are separately managed accounts (SMAs), offering transparency, control and capital efficiency in ways that traditional fund structures often cannot. Our "Separate Ways: Behind the Evolution of Managed Accounts" webinar analyzed this paradigm shift, providing key insights into the accelerating adoption of SMAs. Here, we discuss the critical takeaways from the discussion, highlighting SMA growth drivers, operational and regional trends, and the role of technology in this evolution.
The Shift Toward Transparency and Control
Investor demand for transparency and control has been a pivotal factor in SMA adoption. Institutional investors and family offices seek direct influences and deeper visibility over their investments, prioritizing confidence in how their capital is structured and managed. SMAs, on this front, offer a tailored, flexible model, enabling investors to customize mandates, risk profiles and asset allocation strategies to align perfectly with their objectives.
Our recent survey, conducted in partnership with Hedgeweek, revealed that hedge fund managers’ report a seismic, positive shift in the industry, with many now identifying SMAs as the gold standard for modern fund structuring. This trend is particularly notable among institutional investors and family offices, who require detailed reporting and operational transparency, minimizing the opacity often associated with pooled fund structures.
Operational and Regional Trends Impacting SMA Growth
The scalability of SMAs is influenced by both operational infrastructure and regional dynamics. Demand for SMAs varies significantly by geography. For example, North America has seen greater adoption of SMAs, driven by the region’s well-matured infrastructure and favorable regulatory conditions. However, interest is accelerating in Europe and Asia as demand and service providers’ capabilities catch up.
Operationally, the transition to SMAs introduces new complexities. Fund managers looking to scale their SMA offerings must prioritize establishing a scalable and resilient operational framework capable of handling bespoke client demands. This requires investment in skilled talent and streamlined back-office processes to efficiently manage the intricacies of separate accounting, reporting and compliance for each account. That means streamlining middle-back-office processes, enhancing reporting capabilities and attracting specialized talent to manage the nuances of custom account servicing.
Role of Technology in Enhancing SMA Efficiency
Technology plays a crucial role in the growth and adoption of SMAs. With the growing complexity and volume of managed accounts, automation and data-driven tools are becoming indispensable. Advanced technology platforms help fund managers execute transactions, reconcile data seamlessly and generate real-time reports.
A standout focus in the webinar is on how tech innovation allows managers to meet heightened expectations for transparency and capital efficiency. AI-driven data validation and centralized data management systems empower investment managers by improving decision-making processes and reducing operational inefficiencies.
Long-Term Growth in the SMA Market
SMAs are poised for long-term growth, as they address fundamental needs within the investment landscape. The shift toward SMAs is not simply a fleeting trend, but rather a durable strategy that reshapes the future of hedge funds. The alignment of investor expectations with the operational flexibility and customization offered by SMAs makes them an attractive option for fund managers looking to enhance their market relevance.
Operational resilience, aided by technology and geographical insights, is key to maintaining this growth. Additionally, fund managers must remain agile to adapt to evolving regulatory landscapes and shifting client priorities.
Final Thoughts
The evolution of managed accounts transforms how hedge funds operate and engage with investors. Whether you are an investor seeking tailored solutions or a fund manager navigating this transformation, SMAs represent the future of the hedge fund industry.
To gain more actionable insights and explore how your organization can leverage these developments, watch the full "Separate Ways: Behind the Evolution of Managed Accounts" webinar.