SMAs suit large investors who want transparency, custody and bespoke terms, and managers who want to start without a fund's setup cost. Their limits are that each account is separate, so the manager runs many books rather than one; returns are not independently administered, so they do not build an underwritable track record; and most institutional allocators can only invest through a fund.
Many managers run SMAs and a fund side by side, with the fund receiving investors who need a pooled vehicle.