Smut fungi are plant pathogens mostly parasitizing wild species of grasses as well as domesticated cereal crops. Genome analysis of several smut fungi including Ustilago maydis revealed a singular clustered organization of genes encoding secreted effectors. In U. maydis, many of these clusters have a role in virulence. Reconstructing the evolutionary history of clusters of effector genes is difficult because of their intrinsically fast evolution, which erodes the phylogenetic signal and homology relationships. Here we describe the use of comparative evolutionary analyses of quality draft assemblies of genomes to study the mechanisms of this evolution. We report the genome sequence of a South African isolate of Sporisorium scitamineum, a smut fungus parasitizing sugar cane with a phylogenetic position intermediate to the two previously sequenced species U. maydis and Sporisorium reilianum. We show that the genome of S. scitamineum contains more and larger gene clusters encoding secreted effectors than any previously described species in this group. We trace back the origin of the clusters and find that their evolution is mainly driven by tandem gene duplication. In addition, transposable elements play a major role in the evolution of the clustered genes. Transposable elements are significantly associated with clusters of genes encoding fast evolving secreted effectors. This suggests that such clusters represent a case of genome compartmentalization that restrains the activity of transposable elements on genes under diversifying selection for which this activity is potentially beneficial, while protecting the rest of the genome from its deleterious effect.