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New Managers June 2014

SCOTSTONE COLUMN: Truffles - Small funds with excellent track records

 

Ian Hamilton

This column is authored by Ian Hamilton, who is the founder of IDS Group. IDS provides fund administration services in Africa and Europe through Malta. He is also the founder of Scotstone Investments, a company that has fund structures and services for global emerging new managers.

Truffles - Small Funds with Excellent Track Records

Small funds that have been in existence for a number of years with good track records are what I call Truffles, or unearthed special treats and you do not have to have a pig to find them. Rather a dogged approach with a well-trained nose for sniffing them out.

The issue is the obsession with emerging managers and financing them, i.e. trying to identify the winners of tomorrow. As a result investors and seeders tend to ignore the many smaller funds that have excellent and proven track records. Truffles are complaining that it is difficult to attract new money. A major reason is that they are considered too small and many investors do not want to be the major investor in a fund. They want security in number insofar as there are other major investors.

Actually emerging managers face the same issue. Large investors do not want to be the dominant investor. Neither do they want to make small investments that lead to the proliferation of funds to monitor in a portfolio. How then should Truffles go about seeking additional money? This is not an easy question to answer, but the following are some common sense suggestions that may help a little.

Firstly, approach your current investors. If they are happy they need to be reminded of the success and asked if they would like to add to their current investment. In most business......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
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