SMAs reach $255bn, Goldman says

Separately managed accounts (SMAs) are gaining significant traction in the hedge fund industry, with their managed capital reaching $255 billion by the end of 2025, according to a report by Reuters quoting research from Goldman Sachs. This represents a 20% increase from 2024, showcasing the rising usage of SMAs by large multi-manager hedge funds seeking external investment talent while maintaining control over individual capital pools.

Goldman Sachs' Prime Insights and Analytics team stated that SMA growth has outpaced overall hedge fund industry expansion, driven by competition for experienced investment professionals spurring managers to build individual relationships with allocators and specialist third-party funds. Under an SMA structure, an investor or manager allocates capital to a dedicated account managed under a pre-agreed mandate, unlike commingling in traditional hedge funds.

This arrangement offers investors greater transparency and control over assets, along with the ability to negotiate management and performance fees. Since gaining prominence following the global financial crisis, SMAs have seen a decade-long annualized growth rate of 13%, compared to 5.5% for the hedge fund industry as a whole, accounting for 7.4% of total hedge fund assets.

Roughly half of hedge funds now operate at least one SMA, while larger institutional allocators such as pension funds and sovereign wealth funds are increasingly employing SMAs for enhanced control and flexibility in deploying capital to external managers. Goldman identified a notable surge among the industry's largest hedge fund firms, with the proportion of managers managing over $5 billion in assets with SMAs increasing by 6% between 2024 and 2025.

These larger firms also experienced the most substantial growth in the number of SMAs they oversee, attributed to their superior operational resources and technology infrastructure supporting additional dedicated mandates. The SMA trend also correlates with the growing importance of multi-manager platforms in the hedge fund industry.

These large platforms have increasingly allocated capital to specialized investment teams and external managers, with SMAs providing a mechanism for deploying such capital without integrating it into a broader commingled vehicle. Goldman attributes the rise of SMAs to a talent shortage, as multi-managers seek to access independent third-party hedge funds through SMAs.

The report also found that hedge fund firms using SMAs delivered returns approximately 0.4 percentage points higher for investors compared to comparable commingled investors, although this represents an observed difference rather than evidence that the structure itself yields superior performance.