A first-of-its-kind report on separately managed accounts (SMAs) in the hedge fund industry from national law firm Seward & Kissel LLP reveals that investor demand for bespoke products has resulted in an increase in SMAs.
The SMA Snapshot Report offers detailed metrics on the individualised accounts that are increasingly favoured by large ticket investors.
“The demand by investors for specific terms and strategy exposure is substantial, and only growing, which has been a large contributor to the increase in SMAs,” says Steve Nadel, a partner in the Investment Management Group of Seward & Kissel and lead author of The SMA Snapshot Report. “We feel that the uptick in SMAs reflects the convergence of the four biggest trends impacting the industry – greater investor demand for bespoke products, private asset exposure, ESG sensitivity, and cryptocurrency.”
For 45 per cent of the SMAs studied, managers deviated from the investment strategy of their flagship hedge funds to accommodate investor mandates around a handful of priorities, including ESG considerations, exposure to privates and digital assets, as well as other issues.
The report also reveals that most investors in SMAs (52 per cent) are funds, while 25 per cent were high-net-worth individuals and family offices, and that the vast majority (82 per cent) of SMA managers have more than two years of experience as hedge fund managers; 61 per cent had more than five years of experience.
