For longer than anyone can document investors and pundits have
debated the issue of whether large or small Investment managers are
better suited to manage institutional assets. Those who favor large
firms speak of their prominence, their pedigree and the power that
managing billions brings. Advocates of small managers speak of their
maneuverability, their flexibility and their creativity. They assert
that mega-managers are muscle-bound, unwieldy. They also mention
performance.
Large investors have eschewed hiring smaller managers because of “the
risks” in such a strategy; they claim that small firms aren’t staffed to
manage large mandates; what if a key man leaves? Small firms do not
offer multiple products; we never heard of them, nor did our consultant;
if they under-perform I might suffer job risk. But they rarely mention
performance.
There have now been a sufficient number of academic studies to conclude
that small firms outperform large firms and do so in every market sector
and in up or down markets. How, then, can major institutions obtain the
superior returns of boutiques while removing the supposed risks?
Fund Solutions believes the answer is in hiring “teams” of small managers, which is precisely the service we are offering.