Podcast Episode 24: Separately Managed Accounts, Customisation, and the Future of Institutional Investing
In this episode, Brian Digney is joined by Josh Kestler, President of Innocap, to explore one of the most significant structural trends in alternative investments: the rapid growth of separately managed accounts (SMAs). Drawing on more than a decade of experience building institutional managed account platforms, Josh explains why SMAs have evolved from a niche institutional solution into a mainstream investment structure reshaping how allocators access hedge fund strategies.
Josh begins by explaining what SMAs are, how they differ from traditional commingled funds and long-only managed accounts, and why institutional investors increasingly favour dedicated managed account structures. He outlines the evolution of the market following the Global Financial Crisis, through increasing demand for customisation, to today’s focus on capital efficiency and operational alpha.
The discussion explores the key drivers behind SMA adoption. Josh explains how greater transparency, enhanced governance, customised investment guidelines and improved operational oversight allow institutional investors to tailor portfolios to their specific objectives while maintaining strong risk controls. He also discusses how advances in technology and specialist managed account platforms have made these structures increasingly accessible for the world’s largest allocators.
Capital efficiency forms a major part of the conversation. Josh explains concepts such as notional funding, cross-margining and operational alpha, demonstrating how sophisticated platform structures can optimise collateral management and free up capital without altering investment strategies. He also discusses the operational infrastructure required to support these arrangements and the role platform providers play in overseeing risk, collateral and regulatory responsibilities.
The episode also examines how SMAs benefit investment managers. Josh addresses common misconceptions around transparency, operational complexity and data sharing, arguing that managed accounts can strengthen long-term partnerships between allocators and managers while providing emerging managers with institutional infrastructure and greater access to capital.
Finally, Josh shares his perspective on where the industry is heading. He discusses continued global adoption of SMAs, increasing demand for real-time data and customisation, and why he believes managed accounts will continue transforming institutional investment over the coming years.
Key takeaways include:
- Separately managed accounts provide institutional investors with greater control, transparency and portfolio customisation than traditional commingled funds.
- Capital efficiency through notional funding and cross-margining is becoming an increasingly important driver of SMA adoption.
- Managed account platforms deliver operational oversight, risk monitoring and regulatory infrastructure that support both investors and managers.
- Emerging managers can benefit from institutional operational support while building long-term relationships with sophisticated allocators.
- The continued growth of SMAs is likely to reshape how institutional investors access alternative investment strategies worldwide.
Whether you are an institutional investor, asset manager, hedge fund professional or investment consultant, this episode offers valuable insights into one of the fastest-growing developments in alternative investment structures and what it means for the future of institutional portfolio construction.