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New Managers May 2018

Perspectives: Investors eye capacity constrained strategies

 

Investors eye capacity constrained funds

It's no secret that investors are putting more money into lowcost passive investments than ever before. But, there may be an unexpected benefit for fund managers - a renewed interested in niche funds.

"We have been drawn to more capacity constrained strategies lately," said Stephen Prince, Head of Asset Management, at Tetragon Financial Group from the stage at Context Las Vegas. He added that for investors that are willing to look at smaller funds the alpha generation opportunities can be significant

Strategies noted from the stage included microbuyout, discretionary global macro, short-only and thematic programs

As Opalesque previously reported, seeding platforms have already become more open to niche funds but often big investors are the last to sign on. Michelle McCloskey, President of Americas at Man Group suggested that investors are getting savvier about the role of different strategies in an overall portfolio which is leading them to take a second look at funds they may have previously passed over. "It's not so much about total return anymore," she said. "Investors are thinking about outcomes and risk management. The role of active management is changing in the eyes of investors."

If what McCloskey says is true, then arguably investors are thinking about active management correctly for perhaps the first time.

Panelists added that opportunities for alpha change as market regimes change, which means that certain strategies may fall out of favor for a time. That doesn't mean active management is dead. Indeed investors may return to active managers if volatility sticks around. "What people have forgotten is that we are in a very anomalous time for markets," said Robert E. Kiernan, Principal and Chief Executive......................

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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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