Merrill Lynch reportedly may soon join the charge for financial service firms to begin offering registered funds of hedge funds in separately managed accounts. Separately managed accounts have for years outpaced mutual funds in capturing assets from affluent investors, but numerous operational and regulatory challenges complicate the prospect of integrating traditional hedge funds into portfolios of long-only investment strategies. But the recent surge of interest in registered hedge funds-of-funds may provide a solution to the SMA providers' dilemma.

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