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Alternative Market Briefing

Report notes an increase in the number of hedge fund managers entering into SMA relationships

Monday, September 19, 2022

B.G., Opalesque Geneva for New Managers:

US law firm Seward & Kissel notes in its recent SMA Snapshot Report that it has seen, within the US hedge fund market, an increase in the number of managers entering into separately managed account (SMA) relationships these last 12 months. This reflects the generally increasing demand for bespoke products.

The report features fewer new managers (those founded less than two years ago) than last year (9% as opposed to 18%). That may be because newer managers are offering founders classes, thus removing the need for many newer manager investors to seek out SMA arrangements.

A breakdown of investors into SMAs shows the share of funds that invest in SMAs has increased significantly compared to last year (from 52% to 75%). The other investors are high net worth individuals and family offices (15% compared to 25% last year), and others. New managers with SMA arrangements dealt with fund investors only. "The significant rise in the percentage of fund investors may be indicative of their abilities to best marshal the increased resources necessary to source, diligence and negotiate with SMA managers in the current environment."

More than half of strategies in SMAs are equity-focused, a bit less than last year. Almost a third have a credit-focused strategy. "Approximately half of the strategies implemented deviated from the manager's flagsh......................

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