Key Takeaways
- • Nearly half of U.S. hedge fund launches in 2024 began with a separately managed account (SMA) structure, up from one-quarter in 2023, signaling a structural shift in how new managers establish themselves and access capital in a consolidating industry.
- • SMA assets reached a record $315 billion by end-2024, representing over 7% of total hedge fund industry assets—double their 2010 share—demonstrating sustained institutional and individual investor demand for transparency, control, and customization.
- • The SMA model enables hedge fund startups to bypass traditional fundraising obstacles by launching with single anchor clients (institutional platforms or ultra-high-net-worth individuals), providing faster market entry but creating concentration risk if that client withdraws capital.
- • Individual investors are increasingly accessing hedge fund strategies through managed-account platforms (BNY Mellon's HedgeMark grew assets by nearly one-third to $21 billion in the first half of the year) and liquid alternative ETFs, which Greenwich Associates forecasts will triple in assets within 12 months.
- • Hedge fund liquidations declined in 2025 relative to new launches, marking a reversal of the multi-year trend where collapses exceeded starts, with the SMA trend cited as a key stabilizing factor for startup survival amid industry consolidation dominated by multi-strategy giants.
Summary
The hedge fund industry is undergoing a structural realignment as startups increasingly adopt separately managed account (SMA) models rather than launching traditional commingled funds. According to Goldman Sachs data, nearly half of U.S. hedge fund launches in 2024 utilized the SMA structure, up sharply from 25% the prior year. This shift reflects both the maturation of the SMA ecosystem and the rising barriers to capital for independent managers competing against entrenched multi-strategy firms. The model prioritizes stability and scale from institutional backers or platform operators over traditional independence, accelerating time-to-market while reducing operational friction.
The SMA trend has achieved significant scale within the broader hedge fund ecosystem. SMA assets reached $315 billion by the end of 2024, more than doubling their share of total hedge fund assets from 7% to over 7% of the $3.2 trillion industry. This growth was initially catalyzed by post-2008 demand for transparency and investor control, but is now sustained by efficiency advantages—including leverage negotiation, fee flexibility, and liquidity retention—that appeal particularly in a higher-rate environment. Innocap's platform exemplifies this momentum, surpassing $100 billion in assets following minority investments from ADIA and Bain Capital.
Individual investors are gaining direct access to hedge fund strategies through multiple channels beyond traditional separate accounts. BNY Mellon's HedgeMark platform grew assets by nearly one-third in the first half of the year to $21 billion, while liquid alternative ETFs are expected to triple assets within 12 months according to Greenwich Associates research. These transparent wrappers address long-standing investor frustrations regarding hedge fund opacity and fees, offering customizable exposure to hedge-fund-like strategies with lower entry barriers than traditional $1 million minimum investments.
The SMA model carries dual implications for industry consolidation. Startups like Machina Capital, which launched via an SMA from Schonfeld Strategic Advisors in 2017 before building to $1.1 billion independently, demonstrate that SMA beginnings can establish lasting independence. However, the concentration risk remains material—if an anchor client withdraws, a young fund faces immediate capital pressure. The offset is meaningful: hedge fund liquidations declined in 2025 relative to new launches, reversing a multi-year pattern where closures exceeded starts, suggesting the SMA structure is improving survival odds for emerging managers navigating an industry increasingly dominated by scale-advantaged competitors.
The SMA trend has achieved significant scale within the broader hedge fund ecosystem. SMA assets reached $315 billion by the end of 2024, more than doubling their share of total hedge fund assets from 7% to over 7% of the $3.2 trillion industry. This growth was initially catalyzed by post-2008 demand for transparency and investor control, but is now sustained by efficiency advantages—including leverage negotiation, fee flexibility, and liquidity retention—that appeal particularly in a higher-rate environment. Innocap's platform exemplifies this momentum, surpassing $100 billion in assets following minority investments from ADIA and Bain Capital.
Individual investors are gaining direct access to hedge fund strategies through multiple channels beyond traditional separate accounts. BNY Mellon's HedgeMark platform grew assets by nearly one-third in the first half of the year to $21 billion, while liquid alternative ETFs are expected to triple assets within 12 months according to Greenwich Associates research. These transparent wrappers address long-standing investor frustrations regarding hedge fund opacity and fees, offering customizable exposure to hedge-fund-like strategies with lower entry barriers than traditional $1 million minimum investments.
The SMA model carries dual implications for industry consolidation. Startups like Machina Capital, which launched via an SMA from Schonfeld Strategic Advisors in 2017 before building to $1.1 billion independently, demonstrate that SMA beginnings can establish lasting independence. However, the concentration risk remains material—if an anchor client withdraws, a young fund faces immediate capital pressure. The offset is meaningful: hedge fund liquidations declined in 2025 relative to new launches, reversing a multi-year pattern where closures exceeded starts, suggesting the SMA structure is improving survival odds for emerging managers navigating an industry increasingly dominated by scale-advantaged competitors.
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