Key Takeaways
- • Separately managed accounts (SMAs) in hedge funds reached $255 billion in assets at end of 2025, representing 20% year-over-year growth from 2024, according to a Goldman Sachs report released September 23, 2026.
- • SMA-managed hedge fund assets have grown at a compound annual rate of 13% over the past decade, significantly outpacing the broader hedge fund industry's 5.5% growth rate, indicating a structural shift in capital allocation preferences.
- • Abu Dhabi Investment Authority (ADIA) has deployed approximately $40 billion into hedge fund SMAs this year, exemplifying institutional allocators' preference for single-client managed accounts that offer enhanced transparency, control, and fee negotiation leverage.
- • The proliferation of SMAs reflects talent scarcity in the hedge fund industry, with multi-strategy managers increasingly using SMAs to access independent third-party hedge fund talent rather than competing for in-house hiring.
- • The broader hedge fund industry is positioned to reach $5 trillion in total assets by 2027–2029, with SMAs representing a growing and increasingly strategic component of this expansion.
Summary
Separately managed accounts have emerged as one of the fastest-growing segments within the global hedge fund industry, with assets reaching $255 billion at the end of 2025—a 20% increase from the prior year. According to a Goldman Sachs report released September 23, 2026, this growth trajectory reflects a fundamental reallocation of capital toward single-client hedge fund structures, a segment that was once considered niche but has now become central to institutional investment strategy.
The acceleration of SMA adoption reflects several structural drivers within the hedge fund ecosystem. Multi-strategy hedge funds, facing intensifying competition for investment talent, have increasingly turned to SMAs as a mechanism to deploy capital into independent third-party hedge funds without expanding their internal headcount. This outsourcing model addresses the industry's ongoing scarcity of specialized investment talent while preserving the multi-manager fund's ability to access differentiated strategies. Over the past decade, SMA-managed assets have compounded at 13% annually, nearly 2.5 times the 5.5% growth rate of the broader hedge fund industry, demonstrating that allocators are actively rebalancing toward this structure.
Institutional allocators have been particularly aggressive in deploying capital into SMAs. Abu Dhabi Investment Authority, one of the world's largest sovereign wealth funds, has ramped up its hedge fund exposure through SMAs to approximately $40 billion this year, highlighting the preference among sophisticated investors for structures that provide enhanced transparency, direct control over assets, and improved fee negotiation terms. These characteristics became increasingly valuable as allocators sought to optimize returns in a high-rate environment while maintaining tighter oversight of manager operations.
The broader hedge fund industry is benefiting from this capital reallocation, with total industry assets now tracking toward $5 trillion by 2027–2029. Hedge fund giants in the Billion Dollar Club reached a record $3.6 trillion in assets as of mid-2025, representing 86% of global hedge fund capital. As SMAs continue to capture a growing share of new inflows, they are reshaping competitive dynamics, forcing fund managers to consider alternative structures for capital management and reinforcing the industry's trajectory toward record asset levels.
The acceleration of SMA adoption reflects several structural drivers within the hedge fund ecosystem. Multi-strategy hedge funds, facing intensifying competition for investment talent, have increasingly turned to SMAs as a mechanism to deploy capital into independent third-party hedge funds without expanding their internal headcount. This outsourcing model addresses the industry's ongoing scarcity of specialized investment talent while preserving the multi-manager fund's ability to access differentiated strategies. Over the past decade, SMA-managed assets have compounded at 13% annually, nearly 2.5 times the 5.5% growth rate of the broader hedge fund industry, demonstrating that allocators are actively rebalancing toward this structure.
Institutional allocators have been particularly aggressive in deploying capital into SMAs. Abu Dhabi Investment Authority, one of the world's largest sovereign wealth funds, has ramped up its hedge fund exposure through SMAs to approximately $40 billion this year, highlighting the preference among sophisticated investors for structures that provide enhanced transparency, direct control over assets, and improved fee negotiation terms. These characteristics became increasingly valuable as allocators sought to optimize returns in a high-rate environment while maintaining tighter oversight of manager operations.
The broader hedge fund industry is benefiting from this capital reallocation, with total industry assets now tracking toward $5 trillion by 2027–2029. Hedge fund giants in the Billion Dollar Club reached a record $3.6 trillion in assets as of mid-2025, representing 86% of global hedge fund capital. As SMAs continue to capture a growing share of new inflows, they are reshaping competitive dynamics, forcing fund managers to consider alternative structures for capital management and reinforcing the industry's trajectory toward record asset levels.
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