Research has shown that emerging asset managers consistently outperform industry benchmarks and have overall stronger performance in market downturns. Despite their documented level of success, these managers work with just 1.3% of the assets in the $69 trillion U.S. money management industry, according to a study by Bella Research Group and the John S. and James L. Knight Foundation. This discrepancy illustrates the difficulty inherent in getting the attention of the large pension funds, institutional investors, and foundations whose allocation of funds allow emerging managers to grow and gain influence. The current volatility and uncertainty within the hedge fund environment have only exacerbated the issue.
These challenges, and what can be done to address them, were among the topics under discussion at a recent Bloomberg Hedge Fund event, Diversity Drives Returns. Panelists represented a variety of perspectives surrounding emerging managers – from large public pensions to private investment firms– but all agreed that these managers and those allocating funds to them need to evolve with the market to be successful.