"One of the biggest trends in the hedge-fund world, however, appears to be doing the opposite. Its popularity is surging heading into 2026, according to industry insiders. The so-called separately managed account, or SMA, sounds stodgy and is by no means new. But this way of investing in top hedge-fund strategies and talent reached new heights in 2025 - and now, everyone wants a piece of the action."
"A quick refresher: Traditionally, hedge funds raise capital by securing a group of investors, or limited partners, into a single commingled pool of money. That capital is then deployed across long-short equity, merger arbitrage, distressed credit, or myriad other strategies. Allocators receive periodic performance updates but have limited visibility into day-to-day positions, and their money is typically locked up to avoid panicked withdrawals during market stress."
"With a managed account - which has existed for decades but gained traction in the 2010s after the financial crisis and Bernie Madoff debacle - investors get white-glove treatment. Their money may be deployed in similar strategies, but it's handled separately, with daily transparency into trades and positions and often the ability to redeem on short notice. It's a bit like flying via private jet versus commercial: The destination is ultimately the same, but with a different level of service, control, and prestige."
Separately managed accounts (SMAs) experienced a surge in popularity in 2025 as investors sought alternatives to traditional commingled hedge-fund structures. SMAs place each investor's capital in separate accounts, offering daily transparency into trades and positions and often allowing redemptions on short notice. Traditional hedge funds pooled limited partners' money, provided periodic updates, and imposed lockups to prevent panicked withdrawals. SMAs add operational complexity but deliver white-glove service, greater control, and enhanced visibility. Investors across the spectrum are competing to allocate capital to top hedge-fund strategies via SMAs, and more portfolio managers are offering them to capture inflows.
Read at Business Insider
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