Studies have shown that as investment firms grow in size over time, the range of their investment returns relative to the broad market averages compresses.
Conversely, while the mean return of smaller, newer firms is not significantly different from that of larger firms, the range is much wider, offering the opportunity for higher returns - but also the risk of much lower returns if managers are not carefully selected.
Just as exceptional returns can be obtained by investing in stocks of small companies early in the growth cycle, talented emerging investment managers offer a similar opportunity: Motivation to outperform peers (and attain successful growth) is high, and committee structures and large asset bases do not yet impede the ability to find and act quickly on the best ideas.
Emerging manager programs can be a source of value added for all categories of investors. Large institutions typically have difficulty taking advantage of the superior investment potential of emerging managers through direct placements because of the need to place large assets with each individual investment firm retained.
A multiple manager investment program offers the ability to gain access to a variety of interesting firms through a single appointment at competitive fees.
Emerging manager programs not only provide value added potential themselves, but also offer an early “incubation” with firms that can be promoted to a larger role within the client’s structure when the manager’s asset base becomes more substantial.
C A P I T A L P R O S P E C T S L L C