Joshua Kestler, President of Innocap, joins Brian Digney of the Standards Board for Alternative Investments to discuss how institutional allocators use Dedicated Managed Accounts (DMAs) to access hedge fund strategies.

The conversation covers what separates a DMA from a separately managed account, and why alternative strategies using leverage and short selling need a limited liability vehicle rather than an account sitting on the allocator’s balance sheet.

Josh explains how the market developed through three phases. Control and transparency became priorities after the 2008 financial crisis. Customization and the ability to negotiate terms drove adoption through the 2010s. Capital efficiency became a driver once borrowing stopped being close to free.

He goes into what customization means in practice, from choice of legal entity and domicile through to ESG parameters and fee structures. He also covers how notional funding and cross-margining free up capital, and why treasury teams at pensions and sovereign funds now charge their own hedge fund desks for the firm’s capital. The conversation closes on which strategies suit the structure, which do not, and what allocation size makes one viable.

Recorded for the SBAI Podcast, episode 24.