Shannon Hawthorne

14/07/2010 Author: Shannon Hawthorne

Life is getting easier for small managers 

It’s been a tough couple of years for emerging hedge fund managers. Caught in the interminable catch-22 of trying to establish a solid track record and attract investment without having any track record to reassure investors, post-crisis capital raising has, for many, been a frustrating enterprise.

But while the life of the new manager is still far from an easy one, prospects for future growth today seem much improved.

One fund of hedge funds (FoHF) recently told HFMWeek that it now actually prefers allocating to newer, smaller managers, as it often finds them to be keener, more focused and – crucially – better performers.

And said FoHF, it seems, is not alone. A 2010 report produced by research firm Preqin revealed that around 35% of institutional investors surveyed were happy to invest in funds with less than $100m in assets under management.

That said, in hedge funds, as in life, it helps to stand out from the crowd, and according to consultants from both Mercer and Towers Watson, smaller managers running more ‘niche’ strategies – traded life policies being a key example – are enjoying a growing interest from institutional investors.

If a manager is able to offer investors greater diversification alongside robust risk management and, of course, the ability to generate solid returns, bigger, it seems, is not always necessarily better.

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