New York (HedgeCo.Net)—In most industries bigger is better. You have bargaining power as a big business and you have economies of scale that allow you to buy goods at a lower cost. In the hedge fund industry, sometimes it is better to be smaller.
In the recent inaugural issue of McKinsey on Investing from McKinsey & Company, they showed how the concentration of assets breaks down among different alternative investment markets. Of the eight segments shown, hedge funds had the least concentration of assets as only 8% of the assets are controlled by the top five managers.
When you compare that to the ETF market where 76% of the assets are controlled by the top five managers, you really get a feel for how spread out the assets are in the hedge fund industry.
With the potential for size to serve as a hinderance on performance, it is understandable for investors to seek out fund managers with fewer assets under management, especially when employing certain strategies or when investing in small-cap markets. HedgeCoVest serves to provide a platform that will assist both the fund managers as well as investors. By providing a place where smaller managers can gain exposure to investors and a place for investors to find smaller managers, HedgeCoVest is trying to help keep the concentration of assets distributed as well as it is now.
That is not to say that HedgeCoVest only works with smaller fund managers, they work with emerging managers with less than $25 million in assets under management, but they also work with more established managers with multi-billion dollar portfolios.
In the same issue of McKinsey on Investing, McKinsey Analysis surveyed both large institutional investors as well as well as smaller investors. What the survey results showed is that large investors want more control of their alternative investments and are considering working more with specialist boutiques more so than large generalist managers. The smaller investors surveyed express quite the opposite desires. This group is drawn to larger managers because of their established brand, but they also express that access to quality investments and managers is a top priority.
The most interesting thing about the survey answers and what both the larger and smaller investors are looking for is that HedgeCoVest offers solutions for both sides. Larger investors want separate accounts and specialist managers: both of which can be found on the HedgeCoVest platform. Smaller investors want access to a broad range of quality managers with sound risk management practices and they want access to larger managers due to the perception of stability. HedgeCoVest can help the smaller investors just as much as they can help the larger investors.
The HedgeCoVest platform provides all sorts of investors access to both large and small hedge fund managers and it does so in a separately managed account. It does so with complete transparency and liquidity. With one platform, investors can meet their needs and their wants.