Navigating SMAs in hedge fund operations

What are the key drivers behind SMAs gaining traction among hedge funds?

SMAs offer investors flexibility in creating tax-efficient vehicles, control over capital deployment, portfolio construction, and customized reporting for enhanced transparency. Coupled with the changes in the regulatory landscape, these are the major factors driving the rise of SMAs. According to a recent survey by Hedgeweek, nearly half of fund managers now offer SMAs. Though this is largely led by the US and Europe, we’ve seen an increase in interest among APAC managers over the last 12 months.

How have investor demands shifted in recent years around customization and reporting?

We have witnessed a shift in how investors view the importance of NAV statements and their related content in the aftermath of the financial crisis, and demand for greater transparency from fund managers.

In our experience, institutional investors, including large asset managers, typically have established their own platforms and infrastructure, to satisfy legal/regulatory, tax, risk management, compliance and cost requirements. So, the challenge for fund managers is to achieve integration with the investors’ workflows and reporting framework in the most efficient way, while maintaining costs at a minimum. Investors are demanding more real-time reporting on portfolio positions, details on investment strategies, exposures in industry segments and geographies, and breakdowns of expenses, etc. – all of which align to the objective of setting up an SMA.

What are some considerations hedge funds should have when establishing SMAs?

Understanding the specific needs of the investors and desired outcomes is first and foremost when discussing SMAs, followed by evaluation of the managers’ own infrastructure to cope with the nuances and growing demands of investors. Operational scalability should be top of mind when fund managers decide to offer SMAs. Selection of third-party service providers/partners becomes essential when considering the product offering. From recent conversations during investor due diligence, we noted investors’ placing greater focus and scrutiny on the managers’ operational infrastructure, as well as their outsourced partners

In the same Hedgeweek report, it was noted that managers above $10bn AUM are more likely to offer SMAs due to the infrastructure that they have built – often in partnership with a very large provider with a well-established infrastructure. Independent fund administrators with a global footprint (like SS&C), have the advantage of offering a consistent global operating model, backed by technology, and having taken into account local nuances, and are well-positioned to support fund managers embarking on the SMA journey.

About
Michael Li is Managing Director of SS&C GlobeOp, SS&C’s alternatives fund administration business. Based in Hong Kong, Michael is responsible for the overall business management and product offerings of the business across APAC. Michael was part of the core management team that established SS&C’s private equity fund services business in Asia in 2007, and now leads the hedge fund and private markets businesses in the region. Before joining SS&C, Michael spent numerous years at Deloitte and Arthur Andersen in the assurance practice focused on private equity and venture capital firms in the San Francisco Bay Area. Michael is a Certified Public Accountant in the State of California and holds a Bachelor of Science from San Francisco State University, majoring in Finance and Banking.

This article originally appeared in Service Providers in Private Markets 2025.

_{This is a sponsored opinion by SS&C. The views expressed are provided as of September 2025, do not constitute an endorsement, recommendation, or any other advice, and are subject to change. The following content does not necessarily reflect the views of BlackRock, Preqin, or any of its affiliates. SS&C is not affiliated with Preqin. Preqin received compensation from SS&C in exchange for publishing this content.}