What are the benefits of SMAs for LP's and PM's?

Institutional allocators have been steadily shifting more capital into separately managed accounts (SMAs) and of the end of 2025 they represent a considerably larger share of  hedge fund exposure than in previous years – and the trend is increasing.

What are the Benefits of investing in Hedge Funds via SMA for Institutional Allocators?

• More efficient capital usage – funding a notional account with GMV vs LP investment in a commingled fund creates a more efficient capital usage plan across the LP’s portfolio

• Transparency – providing LP’s greater transparency into the portfolio and having a bird’s eye view into potential strategy drift 

• Liquidity – more attractive liquidity terms vs a commingled fund investment

• Control – more attractive control provisions vs a commingled fund investment 

What are the Benefits for Portfolio Managers to accept SMA’s from Institutional Allocators?

• Greater access to capital via SMA vs commingled funds (at the moment) given the demand from LP’s to allocate to emerging managers lifting out of well-known hedge fund complexes – what used to be a handful of SMA allocators now boasts close to 80 and growing

• Check sizes for emerging managers via SMA are significantly larger than a potential commingled fund investment

• Speed – these allocations often will take less than 6 months to be vetted and funded

• Scaling the business – given the size of allocations and supply of LP’s allocating via SMA, accepting SMA’s has been a catalyst of growth vs commingled funds 

Why Partner with a Multi-Manager, Institutional SMA Allocator?

• Removal of infrastructure items often borne by the Sub-Advisor

• Accounting and finance and middle/back office operational burden eliminated

• Legal, compliance infrastructure for proper regulatory oversight

• Allows PMs to “run money and raise money” – which was most likely the driver for them to launch their firms

• Remain entrepreneurial and operate their own business while maintaining ownership of their track record

Prepare Your Hedge Fund for Scalable Growth

Expanding from a commingled fund to multiple SMA’s OR launching a new firm solely funded by SMA’s - require operational frameworks designed for scale, accuracy, and transparency.

Partnering with Cartesian FinOp Partners helps you execute your hedge fund expansion strategy while building resilient, scalable operations that support growth with confidence.

Frequently Asked Questions

1. Why does in the addition of SMA’s increase operational demands?

Each SMA is a standalone entity/account - managing them together increases hedge fund operational complexity.

2. Can hedge fund operational scalability be achieved without adding staff?

Yes. Automation and standardized workflows allow multi-asset hedge fund operations to scale efficiently - @Cartesian FinOp Partners can be your partner and help you achieve that scalability and grow as you grow.

3. Why is data consistency across SMA’s critical for SMA operations?

Consistent data ensures alignment across trading, accounting, and reporting, reducing errors and delays.

4. How do allocators assess SMA operational readiness?

Allocators value timely reporting, transparency, and the ability to handle hedge fund operational complexity.

5. What role does technology play in SMA expansion?

Technology enables integration, automation, and real-time insight, supporting hedge fund operational scalability.