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Emerging Manager Performances

Emerging Manager Performances

Emerging Fund Managers Outperform Established Ones

Recent hedge fund research came up with a surprising conclusion that flies in the face of conventional thinking of investors.  According to Hedge Fund Research data, emerging managers actually outperformed more seasoned, established hedge fund managers.   Managers with 2 years or less of experience had annualized net returns of 9.3%, opposed to 4.5% for established managers.

Fledgling managers may have an edge, fund analysts say, because they aren't weighed down with legacy positions and are free to invest as they see fit.
"You can have more-concentrated positions," says Rajesh K. Aggarwal, an associate professor at the Carlson School of Management at the University of Minnesota who has studied emerging fund managers.
What's more, since hedge-fund managers collect performance-based fees, "the incentives to perform well in a new fund are tremendous," he says.
The term "emerging" is used loosely among fund managers. It can refer to managers at firms with less than $500 million or so in assets and track records of three years or less, though some investors include women- and minority-owned firms.
Historically, such managers were available mainly to pension funds and other institutional investors. But high-net-worth investors increasingly have access to such managers through hedge funds, funds of hedge funds and other vehicles. Source

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