Separately managed accounts grew 20% last year and have compounded at more than twice the industry's pace for a decade. Multi-manager firms are using them to reach talent they cannot hire.
A once niche corner of the hedge fund business is growing faster than the industry around it.
Separately managed accounts, which a hedge fund runs exclusively for one client rather than pooling money from many investors, held $255 billion at the end of 2025, up 20% from 2024, according to a report by Goldman Sachs' prime insights and analytics unit.
The growth is not a one-year spike. Goldman estimates hedge fund assets managed through these accounts have grown 13% a year over the past decade, compared with 5.5% for the industry as a whole. They now account for 7.4% of industry assets, and half of all hedge funds run at least one.
The biggest driver is the largest multi-strategy firms. Those platforms compete intensely for portfolio managers, and separately managed accounts give them a way to put capital to work with outside funds without hiring the talent in-house. "The ongoing scarcity of investment talent for hire has driven increasing enthusiasm from multi-managers to use SMAs to invest capital in independent third-party hedge funds," the report said.
For the investor, the appeal is control. A dedicated account gives the allocator more say over how assets are managed and more leverage to negotiate management and performance fees. The structure gained traction after the 2008 financial crisis.
Pension funds and sovereign wealth funds are also adopting the accounts more widely, the report said.
Size helps on the manager side. The largest hedge funds, those with more than $5 billion in assets, showed the biggest growth, with 6% more running a separately managed account compared with 2024. Those managers also added the most accounts. The report said that may reflect deeper resources and more scalable operations that let larger firms take on additional accounts with relative ease.
The structure may also be paying off in returns. Firms using separately managed accounts in their portfolios appear to have delivered returns about 0.4 percentage point higher than investors in commingled funds.
The trend may reshape competition for capital among smaller hedge funds. A manager offering only a pooled fund on standard terms could find itself competing against peers willing to build custom accounts for multi-manager platforms, pensions and sovereign funds.
The growth also comes in a strong year for the industry. Global hedge funds are on track for another good year after a strong first half, helped by the AI boom across most strategies. Whether allocators keep shifting toward dedicated accounts when returns cool will show how much of the trend is structural.