As hedge funds pursue growth, they face a fundamental question: can they serve more customised investor mandates while staying efficient enough for that growth to be profitable? 

By Aani Nerlekar, Managing Director, Solutions Management and Sales Engineering at SS&C Advent 

As investors seek greater transparency, control and customisation, demand for separately managed accounts (SMAs) continues to grow. 

Recent research shows that 44% of hedge fund managers have grown their SMA business over the past two years. Over the same period, nearly a third launched at least one new fund structure, while almost a fifth expanded into new asset classes. 

For hedge fund managers, demand for SMAs creates an opportunity to attract new investors and grow assets under management. 

But while revenue may scale as assets grow, costs often rise as exceptions multiply. And SMAs, by their very nature, create exceptions. 

A small number of customised mandates may be relatively easy to absorb. As those mandates multiply, however, the operating model can become increasingly difficult to scale efficiently. 

The question for hedge fund leaders is whether their operating model can accommodate that variation without letting complexity erode profitability. 

The Cost of Scaling Exceptions 

 
In a commingled fund, scale comes largely from repetition. One investment strategy, common workflows and a shared reporting framework can serve a growing pool of investors. 

SMAs introduce variation into that model. One investor may exclude certain securities. Another may impose concentration or leverage limits. A third may require different reporting or greater transparency into portfolio activity. 

The economics change when those differences become recurring operational responsibilities. 

The impact rarely stays within a single function. An account-level restriction can shape a portfolio decision, affect trade allocation, require different compliance monitoring and influence reconciliation, accounting and reporting. Teams must coordinate these variations across the investment lifecycle, keep information consistent and maintain controls for each mandate. 

The cost of an additional SMA is not limited to managing that account. It includes the effort needed to accommodate its requirements across the wider operating model. When every mandate requires its own workflows, reviews and oversight, operational effort can grow in step with the number of accounts. 

For hedge fund managers, the challenge is not customisation itself, but making customisation repeatable. 

 
Operational Scalability Becomes a Competitive Advantage 
 

The central question is whether a firm can expand its SMA business without operational effort rising at the same rate. 

Trading and allocation offer a clear example. Investment decisions must move from portfolio construction through execution and allocation, while account-specific restrictions remain part of the process. 

Compliance presents a similar test. Manual reviews and spreadsheet-based monitoring may work for a limited number of accounts, but become harder to sustain as guidelines multiply. 

Managers can reduce that burden by automating workflows, standardising processes where appropriate and embedding controls throughout the investment lifecycle. The aim is not to eliminate account-level differences, but to accommodate them without creating a separate process for every mandate. 

Firms that manage this variation efficiently may be better placed to win new mandates and expand their SMA business, while improving operating leverage and protecting margins. 

When Disconnected Systems Add to the Cost 

 
Fragmented technology can make scaling SMAs more difficult. Portfolio management may sit on one platform, trading on another and compliance on a third, with spreadsheets bridging the gaps. 

As mandates multiply, teams may spend more time moving information between systems, resolving inconsistencies and reconciling data. The result can be duplicated effort, reporting delays and operational risk. Maintaining a consistent view of portfolios, exposures and account-level requirements also becomes harder. 

Connected data and workflows can reduce that friction and improve transparency across the investment lifecycle. The goal is to ensure that information and processes work together, so that supporting more customised mandates does not mean managing more disconnected pieces. 

Expanding SMAs Without Expanding Complexity 

 
For hedge fund leaders, the question is not simply whether the organisation can support its next SMA. It is whether the business can support the next wave of customisation without multiplying the effort required to manage it. 

Operational infrastructure is a key part of that equation. Supporting SMA growth at scale requires technology that can accommodate account-level variation without creating separate workflows for every mandate. 

Firms that invest in scalable technology, robust governance and trusted operating partners will be better placed to meet allocator expectations, navigate growing complexity and turn operational efficiency into a competitive advantage. 
 

About SS&C Advent’s Eclipse 

 
SS&C Advent's Eclipse helps firms expand SMA programmes without a proportional increase in operational complexity. By unifying portfolio management, trading, compliance, operations, accounting and data on a single cloud-native platform, Eclipse enables managers to support customised mandates at scale while maintaining greater control, efficiency and consistency across the business. 

Eclipse is designed to support growth as managers launch new funds, add SMAs or open additional accounts. Existing integration templates can simplify onboarding, while end-of-day processing and position reconciliation help support new vehicles from day one. 

Its configurable allocation engine allows managers to trade new vehicles alongside existing investments or independently, depending on their trading approach. User-accessible logic also supports the automation of borrow processes and control over where trades are primed. 

As mandates introduce investor-specific requirements, Eclipse’s compliance rule builder and library of pre-built templates help managers accommodate guidelines such as concentration limits, leverage limits and restricted securities. In the back office, managers can run shadow portfolios, value positions independently and calculate returns over time. 

By bringing these capabilities together, Eclipse helps firms accommodate account-level variation within a connected operating environment. The goal is not to eliminate the customisation that makes SMAs attractive, but to make it more manageable, scalable and profitable as the business grows.