Established fund firms out of favour among researchers
Emerging managers lap investment elephants:
In his update paper on fund
performance, No Contest: Emerging Managers lap investment elephants,
Ted Krum, Vice President and senior
investment program manager at
Northern Trust, a large wealth and asset
manager, may be talking about long-only
funds, but, he told Opalesque, a lot of it
applies to hedge funds too.
In his eighth study of emerging fund
managers (in the last 20 years), which
are defined as the smallest firms making up the last 1% of institutional
market share, the paper finds that once again they often can provide better
returns and, strikingly, better downside performance than the household
names. By 2010, the median small manager outperformed the median large
firm by 72 basis points per year; furthermore the largest investment firms
kept on getting larger (even with weak returns).
"In the last 20 years, there were times when small managers did not
outperform the large ones," he explains. "In particular, in a market
environment which has a lot of liquidity being dumped onto the financial
markets, some of the smaller managers may find it difficult to keep up
because the bigger firms, in ever increasing concentration, will be making
up the majority of the market."
But the consistency that he found each time in his research is the greater
dispersion; emerging managers do not always outperform but their results
are more dispersed with higher highs and lower lows.
"As larger firms make up the majority of......................
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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.