More managers are launching through a separately managed account before ever raising a commingled fund. It's an efficient path to institutional capital: an allocator gets position-level transparency and a mandate built to its own specifications, without having to underwrite a manager's full back office on day one.
More managers are launching through a separately managed account before ever raising a commingled fund. It's an efficient path to institutional capital: an allocator gets position-level transparency and a mandate built to its own specifications, without having to underwrite a manager's full back office on day one.
But an SMA is not a shortcut around the operational work of running a fund — it's a preview of it. Every vendor relationship, every counterparty agreement, every regulatory obligation a manager will need at scale shows up during the SMA phase. Get the infrastructure right here, and the eventual move to a commingled fund is a natural extension. Get it wrong, and the SMA becomes the ceiling rather than the floor.
Here's what that infrastructure build actually looks like, broken into the three phases most managers move through.
Phase 1: Building the SMA's Operational Foundation (3–6 Months)
Before the first dollar is allocated, the priority is setting up the vendor relationships and contractual oversight that will support the account — and that will need to scale later.
Map vendor needs before you shop. Identify which categories are essential from day one (IT, compliance, cybersecurity, an OMS/PMS) versus which can wait and build a realistic timeline for each.
Evaluate and select deliberately. The usual categories — research, data, expert networks, IT/managed service providers (MSP), compliance, cybersecurity, OMS/PMS — each carry different diligence requirements. A cybersecurity vendor's security posture and an expert network's compliance controls deserve as much scrutiny as their pricing.
Negotiate terms with an eye on renewal, not just signing. Auto-renewal clauses, fee escalators, and termination rights matter more once a manager is juggling a dozen vendor relationships instead of two.
Build a repeatable vendor management process now. Ad hoc tracking works for a handful of vendors. It breaks down once you have several. A simple system for renewal dates, obligations, and points of contact pays for itself well before the fund launch.
Establish oversight of the investment management agreement (IMA). The IMA governs the SMA relationship itself — fee terms, reporting obligations, termination provisions — and needs the same ongoing attention as any other contract, not a one-time read at signing.
Phase 2: Laying the Groundwork During the Exclusivity Period
Most SMA arrangements include an exclusivity period before the manager can raise a commingled fund. That window is working time, not downtime, and it splits across two parallel tracks: raising the capital and building the trading infrastructure the commingled fund will need under its own name — separate from whatever arrangements support the SMA today.
Building the fundraising foundation:
Set up a virtual data room (VDR) for capital-raising activities before it's needed, not in response to the first interested allocator.
Build introductions to allocators systematically rather than opportunistically.
Prepare to fulfill due diligence questionnaires (DDQs) efficiently — most of the answers should already exist from the SMA-stage documentation work.
Building the fund's own trading infrastructure:
Select and negotiate terms with a fund administrator.
Establish an operating account with a bank in the fund's name.
Select trading counterparties and negotiate the agreements that will govern the commingled fund's execution and financing — prime brokerage, ISDA, master confirmation agreements (MCA), futures, repo, and term commitments each carry distinct negotiating points.
Complete KYC and onboarding with trading counterparties and executing brokers, which can take longer than managers expect.
Confirm adherence to the regulatory regimes that apply — Form ADV, Dodd-Frank, EMIR, and others depending on where the manager and its counterparties sit.
The manager who treats these as sequential — SMA first, fund infrastructure later — usually finds the exclusivity period isn't long enough. The manager who runs both tracks in parallel has a running start.
Phase 3: Contract Discipline After Launch (Ongoing)
A commingled fund launch doesn't retire the SMA-stage agreements — it multiplies them. This is where operational discipline either compounds or erodes.
Consolidate every executed agreement in one place. By this stage, a manager is typically holding vendor contracts, counterparty agreements, an LPA, and investor-facing documents like side letters and IMAs. Scattered storage is how obligations get missed.
Track renewals and deliverable obligations actively. Building a system that surfaces renewal windows and reporting deadlines ahead of time keeps the process proactive rather than reactive.
Plan for continuity through personnel change. Documenting contract knowledge in a shared system, rather than relying on any one person's memory, helps institutional-grade managers keep processes running smoothly through staff turnover.
Keep negotiating. Contracts aren't static once signed — renewals, amendments, and even routine agreements are opportunities to improve terms as a manager's leverage and track record grow.
How Quadrangle Helps
Quadrangle operates as an AI-powered institutional contract intelligence platform built for exactly this stage of growth — proprietary contract data, specialized legal negotiation expertise, and a deeply embedded network across the investment-management industry, brought together to support managers from the first vendor selection at the SMA stage through the ongoing contract management of a scaled, institutional-grade fund platform.
An AI-powered contract technology platform (QDS):
Term-by-term reporting that surfaces a manager's actual position across every vendor and counterparty agreement — not just what's captured in a spreadsheet.
Automated alerts that flag vendor-agreement renewals, obligations, and deadlines before they're missed.
A built-in task manager that assigns ownership over every deliverable, backed by audit logs that keep a clear record of who did what and when.
Specialized legal and negotiation expertise:
Works contract terms directly — from vendor agreements to ISDAs to fund administrator engagements.
Applies an understanding of what those terms mean for a manager at each stage of growth, not a one-size-fits-all playbook.
A proprietary dataset and an embedded industry network:
Built over more than a decade of relationships across the investment-management industry.
Benchmarks a manager's terms against what similar funds are securing today.
Gives a manager building out allocator relationships during the exclusivity period a head start, rather than starting from zero.
The managers who move most efficiently from SMA to institutional-grade fund aren't the ones who treat contract and vendor management as a later problem. They're the ones who build the infrastructure right the first time — with the AI-powered technology, negotiation expertise, and industry network to back it up.
