What Is a Segregated Managed Account (SMA) for Crypto Assets?

As the crypto market becomes increasingly professional, larger investors face not only the question of which assets to hold. Just as important is the structure through which a portfolio is managed. Anyone who wants a six- or seven-figure crypto portfolio managed professionally often needs more individualisation, transparency and control than a standardised investment product can offer.

One possible structure is the Segregated Managed Account, or SMA for short. This is an individually managed investment account or mandate. The assets are not pooled with the capital of other investors in a fund. Instead, an agreed strategy is implemented within a separate mandate.

With crypto assets in particular, this separation is of interest because investors differ considerably: existing token holdings, desired risk, loss tolerance, liquidity needs, permitted instruments and the role of crypto within the overall wealth can be entirely different. A standardised solution inevitably has to level out these differences; a mandate can reflect them.

It begins with the definition of the mandate. This sets out which investment universe may be used, which risk limits apply, which instruments may be employed and which reporting or governance requirements exist. Only then does the actual portfolio management begin.

The specific technical design depends on the provider, the trading and custody infrastructure used and the regulatory framework. The basic principle, however, remains the same: the investor's portfolio is managed separately and the strategy is implemented within the agreed parameters.

A properly set-up mandate separates four roles from one another: the client retains ownership and overarching control. The exchange or custodian provides custody and trading infrastructure. The asset manager takes investment decisions and manages risk. The technical layer handles order transmission, monitoring and reporting. This separation of roles is the actual structural core of an SMA.

An SMA should therefore not be confused with a mere signal service. Alongside the market view itself, professional management also covers position sizes, risk budgets, execution, liquidity, monitoring and reporting. With larger mandates, it is precisely this interplay that becomes increasingly important.

A fund pools the capital of various investors and, in principle, implements a common strategy for them. This can be efficient and offers a standardised investment solution. At the same time, the individual investor has only limited influence on the specific portfolio structure – and shares the liquidity terms with all other investors in the vehicle.

An SMA takes a different approach. The mandate is individual and can be adapted more closely to the investor. Existing positions, risk limits or particular exclusions can be taken into account in the structuring, provided they are compatible with the strategy and infrastructure. Our overview of crypto asset management in Switzerland shows how such mandates fit into the Swiss landscape.

This does not mean that an SMA is fundamentally better than a fund. For smaller investment amounts or investors who deliberately want a standardised solution, a fund can make a great deal of sense. The larger and more individual the requirements become, however, the more attractive a segregated mandate can become.

Individualisation. Risk parameters, investment universe and portfolio structure can be aligned with the investor within the mandate.

Transparency. A separately managed portfolio provides a direct view of positions, exposure and portfolio development – not only with a vehicle's quarterly report.

Clear attribution. The mandate is not part of a jointly pooled fund. This makes it easier to attribute positions, results and responsibilities.

Governance. For family offices and professional investors in particular, a clear separation between investor, manager, trading infrastructure and reporting can simplify internal control.

An SMA changes the structure of a mandate, but does not remove the risks of the asset class. Crypto assets can suffer considerable price losses. Liquidity can deteriorate in periods of stress. Exchanges, custodians and other counterparties can fail or restrict access to assets. Operational errors also remain possible.

It is therefore problematic to sell an SMA solely on terms such as "security" or "control". What matters is which specific infrastructure is used, which rights exist, how risks are monitored and how the portfolio can be managed in a crisis. The structure is one level; risk management, custody, counterparties and governance must be considered together.

A common misconception: a segregated account does not automatically mean that there is no counterparty risk. If the assets are held on a centralised exchange, that exchange remains a counterparty – regardless of whether the account is managed individually. Segregation improves attribution, control and traceability. It does not replace an analysis of the infrastructure behind it.

Counterparty risk can be broken down into six dimensions: exchange (insolvency, withdrawal halt, regulatory restriction), custody (key control, legal custody, access), wallet (seed, recovery, phishing, malware), protocol (smart contracts, bridges, validators), operational (APIs, permissions, human error) and execution (failure of venue, API or trading infrastructure). A mandate should have an answer at each of these levels.

In practice, this means: separating permissions under the least-privilege principle (trading, read and withdrawal are not the same thing), setting withdrawal whitelists and limits, examining redundancy across several trading venues for larger mandates and – depending on volume – considering off-exchange custody models, in which collateral remains with the custodian while only the trading balance is made available on the exchange. More on this on our page on security and custody and in the research paper "Counterparty Risk Management for Crypto Assets".

An SMA can be particularly relevant for high-net-worth private clients who already own a larger crypto portfolio and do not wish to take on its ongoing management entirely themselves. The structure can equally be of interest to family offices that want to integrate a dedicated crypto allocation into their existing wealth architecture.

Professional investors can also benefit from the individualisation where a standardised fund strategy does not match the desired risk or investment profile. For larger mandates in the region of CHF 1 million and above, execution quality, liquidity, counterparties and reporting also gain in importance.

Not every investor needs an SMA, however. Anyone who merely wants to hold a small position in Bitcoin or Ethereum over the long term and needs no active management may be better served by a simpler structure.

Before a mandate is awarded, it should be clear who holds the assets, which access rights the manager has and which actions are expressly excluded. Just as important are the trading venues used, the handling of counterparty risks and the processes for deposits and withdrawals.

On the investment side, investors should understand how risk is defined, how position sizes are arrived at, whether long and short positions are possible and how the management is meant to behave in different market phases. A concrete question helps: what happens in the mandate if the market thesis does not play out – reduced exposure, stop logic, reallocation?

Finally, the reporting should fit one's own governance. A family office often needs different information and decision paths from an individual private client. The more clearly these points are defined before the mandate begins, the more robust the collaboration will be.

A Segregated Managed Account can be a compelling structure for investors who want a larger crypto portfolio managed individually and professionally. The real added value, however, does not come from the SMA label alone.

What matters is the overall system of mandate structure, investment process, risk management, security, execution and reporting. Only when these levels fit together does a separate account become a professional asset management mandate.