Numerous studies have recognized the reality of superior returns from emerging managers. In their study, "Entry and Exit: The Lifecycle of a Hedge Fund," Gimbel, Gupta & Prices (2002,) put it simply: "Profit making is more (common) for younger funds than older funds." While the precise reasons for this outperformance are unknown, it is often true that larger and more mature funds may lack the agility and sufficient manager motivation as compared to their emerging peers. Further, success and its resulting attention tend to result in a herding instinct of fund strategies where both style and returns are homogenized. In the world of investing, bigger isn't necessarily better.
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Numerous studies have recognized the reality of superior returns from emerging managers. In their study, "Entry and Exit: The Lifecycle of a Hedge Fund," Gimbel, Gupta & Prices (2002,) put it simply: "Profit making is more (common) for younger funds than older funds." While the precise reasons for this outperformance are unknown, it is often true that larger and more mature funds may lack the agility and sufficient manager motivation as compared to their emerging peers. Further, success and its resulting attention tend to result in a herding instinct of fund strategies where both style and returns are homogenized. In the world of investing, bigger isn't necessarily better.