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11 Compelling Reasons To Use A Small Fund Manager

OFF AND UNDER THE RADAR:

“EMERGING MANAGERS DO NOT READILY APPEAR ON INVESTORS’ RADAR SCREENS, AS THEY
MAY NOT APPEAR IN THE VARIOUS FUND DATABASES THAT TRACK FUNDS. THE MANAGERS OF
THESE FUNDS CAN OFTEN BE MORE FLEXIBLE IN THEIR INVESTMENT APPROACHES AND
CHOICE OF INSTRUMENTS AND MARKETS, AND ARE OFTEN CHARACTERIZED BY THEIR
WILLINGNESS AND ABILITY TO EMPLOY NEW AND INNOVATIVE INVESTMENT STRATEGIES
EXPLOITING NEW MARKET INEFFICIENCIES. THESE FACTORS CAN RESULT IN A COMPETITIVE
INVESTMENT EDGE OVER THEIR ESTABLISHED PEERS, AND BE REFLECTED IN THEIR RELATIVE
OUT-PERFORMANCE. ACADEMIC AND INDUSTRY EVIDENCE TENDS TO SUGGEST THAT
EMERGING HEDGE FUNDS OUTPERFORM MORE ESTABLISHED ONES.“ ***

"IT IS SOMEWHAT PARADOXICAL THAT INVESTORS CONTINUE TO FALL FOR THE ALLURE OF
SIZE AND THE FALSE COMFORT OF AGE."** After all, no one is going to get fired for buying IBM.

Regarding flying under the radar. We have found it most beneficial for our returns and our partners' income
that, in general, we are not well known as a routine source of capital. No one knows who our financial
partners are. Personal experience has shown us many times that when Paul from Abilene steps up to
purchase a property, the price is far more negotiable than when CB Richard Ellis or Trammel Crow make an
offer.

CLOSER ATTENTION TO DETAIL:

“EMERGING MANAGERS ARE NORMALLY HUNGRY FOR SUCCESS AND HAVE A GREAT
INCENTIVE TO DEMONSTRATE STRONG PERFORMANCE. THEY ARE ABLE TO SEEK OUT THE
SMALLEST OPPORTUNITIES AND INEFFICIENCIES IN THE MARKET, AND ARE LESS LIKELY TO
DEMONSTRATE COMPLACENCY FROM PREVIOUSLY ACCUMULATED FEES AND/OR WEALTH.
ESTABLISHED MANAGERS GENERALLY NEED TO PLACE LESS RELIANCE ON GENERATING A
PERFORMANCE FEE IN ORDER TO OPERATE THEIR BUSINESSES PROFITABLY, WHEREAS
PERFORMANCE FEES ARE VITAL FOR MOST EMERGING MANAGERS. EMERGING MANAGERS
TYPICALLY INVEST A SIGNIFICANT PROPORTION OF THEIR NET WORTH IN THE FUND AND/OR
THE INVESTMENT MANAGEMENT FIRMS, WHILE AT THE SAME TIME SUFFERING SIGNIFICANT
OPPORTUNITY COST OF OFTEN PREVIOUSLY LUCRATIVE EMPLOYMENT, THEREFORE,
PROVIDING A POWERFUL INCENTIVE TO PERFORM.”***

Also, smaller managers must keep a tight rein on cash-flows, pay closer attention to the details of daily
management and be assured of their position in the investment because they cannot sell the asset tomorrow
and recoup the investment.

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