Hedge fund startups are increasingly turning to large anchor investors and separately managed accounts (SMAs) as a way to survive in a market dominated by multi-strategy giants, with early data suggesting the pace of liquidations slowed in 2025, according to a report by Financial News London.
The report cites data from Hedge Fund Research as showing that 138 hedge funds were liquidated in the first half of 2025, down sharply from 244 a year earlier. Over the same period, 262 new hedge funds launched, slightly higher than the 257 launches recorded in the first half of 2024 — a sign that the long-running trend of closures matching or exceeding launches may be easing.
While scale remains a decisive advantage, smaller managers are finding that SMAs offer a more stable and durable source of capital than traditional commingled funds. Under an SMA structure, a hedge fund manages capital on behalf of a single investor, giving allocators greater control while providing managers with “stickier” assets and reduced redemption risk.
Nearly half of US-based hedge fund launches used an SMA as their initial structure in 2024, up from roughly a quarter the year before, according to Bloomberg. Capital allocated through SMAs reached $315bn by the end of 2024, a 27% year-on-year increase.
The SMA model is also lowering barriers to entry at a time when launching a hedge fund has become more expensive, with rising technology, infrastructure and compliance costs. For investors, SMAs reduce the risk of herd-like redemptions that can destabilise commingled funds when a large allocator exits.
High-profile launches backed by established multi-strategy firms highlight the trend. Former Marshall Wace portfolio manager Ravi Naresh launched KR Capital last year with $3bn from Millennium, managed exclusively via an SMA. Schonfeld Strategic Advisors also seeded Omar Newera’s Waha Capital with $500m.
Despite the improving outlook, challenges remain. High-profile closures in 2025, including Ed Eisler’s multi-strategy firm Eisler Capital, underscore the competitive pressures facing smaller managers. Strong returns from multi-strategy funds — including double-digit gains at Citadel and Millennium — have also made it harder for allocators to justify backing emerging managers.
