Separately managed accounts (SMAs) are taking an increasingly important role in the hedge fund industry, with the amount of capital managed through single-client structures reaching $255bn by the end of 2025, according to a report by Reuters citing research by Goldman Sachs.

The figure represents a 20% increase from 2024 and highlights the growing use of SMAs by large multi-manager hedge funds seeking access to external investment talent while retaining greater control over individual pools of capital.

Goldman Sachs' Prime Insights and Analytics team said the growth of SMAs has continued to outpace expansion across the wider hedge fund industry, as competition for experienced investment professionals encourages managers to establish dedicated relationships with individual allocators and specialist third-party funds.

Under an SMA structure, an investor or manager provides capital to a dedicated account that is managed according to an agreed mandate, rather than investing alongside other clients in a commingled hedge fund. The arrangement can give investors greater transparency and control over their assets while providing scope to negotiate management and performance fees.

SMAs have expanded significantly since gaining greater traction following the global financial crisis. Goldman estimates that assets managed through the structures have increased at an annualised rate of 13% over the past decade, compared with 5.5% growth for the hedge fund industry as a whole.

They now represent 7.4% of total hedge fund assets, while approximately half of hedge funds operate at least one SMA, according to the report.

The structures are also becoming more widely used by large institutional allocators, including pension funds and sovereign wealth funds, as investors look for greater control and flexibility in deploying capital to external managers.

Goldman identified particularly strong growth among the industry's largest hedge fund firms. The proportion of managers with more than $5bn in assets operating an SMA increased by 6% between 2024 and 2025.

Those larger firms also recorded the biggest increase in the number of SMAs they manage, which Goldman attributed in part to their greater operational resources and technology infrastructure allowing them to accommodate additional dedicated mandates.

The rise of SMAs is also closely linked to the growing importance of multi-manager platforms in the hedge fund industry. Large platforms have increasingly sought to allocate capital to specialist investment teams and external managers, while the SMA format can provide a mechanism for deploying that capital without placing it into a broader commingled vehicle.

Goldman said a shortage of investment talent available for hire has contributed to increased interest among multi-managers in using SMAs to access independent third-party hedge funds.

The report also found a performance difference between the two structures. Hedge fund firms using SMAs appeared to have generated returns approximately 0.4 percentage points higher for those investors than for comparable commingled investors, although the figure represents an observed difference rather than evidence that the structure itself causes superior performance.