How Small Funds Outperform Large Funds – a Classic David Vs Goliath

Written by admin on April 13th, 2011

Often investors get caught by marketing like anyone else and become absolutely in love with a brand. Case in point is that they’ll take lower returns from a large, name brand fund over the higher returns of a lesser known, small fund. To be fair, the large name brand funds may have earned that brand due to solid past performance.

However, sometimes a brand name is only a name and as the saying goes, you are only as good as your last quarter. With all the volatility in the market affected by every jitter around the world, a short-term outlook is becoming as important as a long-term one. Small funds have the benefit of being both agile and flexible to move with the volatile market, and capitalize on traditional and alternative investment strategies before the larger competition. Another extremely important factor to consider when looking at the size of funds is its relative inflow compared to its outflow. This is very important when looking at hedge funds and other funds that have an alternative investment strategy that is not publically traded or correlated to the global financial markets. In simple terms, a large fund that has a huge amount of assets that need to be invested have an issue of where to put all of the money because they are not dealing in a market with liquidity. It is because of this that guidelines are stretched and additional risk is taken all because there are investor dollars expecting a return.

The ability to pick and choose the investments get caught by the demand side, and the managers end up with a few hopes and dreams in the portfolio, instead of all solid choices. All of the prior points are important, but I think the greatest benefit of a small fund is the accessibility to the managers. I will be coming out with a full article on the benefits of small funds, but I would like to leave you with this. It’s a fact of life that most big things started out small. That goes for everything from structures, governments, markets, companies, and the funds that invest in all of them. The real returns on all of these were not garnered at the end, but more so at the beginning when the ideas were fresh and the motivations clear. Ask yourself if you are sacrificing your investment dollars for an old brand, because running with the crowd can sometimes get you trampled.


Copyright: Dominic Mazzone, Regent Global Funds 2008

This article was written by Dominic Mazzone, Managing Partner and Fund Manager of Regent Global Funds.

This article and other like it can be viewed at which is part of the Regent Global Funds Network.

Regent Global Funds, is an alternative investment fund that offers its participating investors and asset backed investment through asset based lending.

The Fund Managers of Regent Global Funds have an expertise in commercial real estate lending and have created a successful alternative investment vehicle that is diversified through this structure.

They separate themselves from other fund mangers by personally investing their own money side-by-side with their investors in the fund, creating an absolute structure of accountability. Dominic Mazzone has written about the need for this type of accountability in an article titled “Fund Managers Need to be Accessible and Personally Invested.”


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