Financial Times: Smaller emerging market funds out-hustle safe giants
Tom Stabile in Sunday’s Financial Times raises the conundrum of how smaller more niche investors, like VIY Management, attain the support of large investors who want to invest in non-traditional emerging funds, but are often discouraged by the time and financial costs involved.
According to data from the Emerging Markets Private Equity Association, the average size of funds has risen year on year, with the more significant funds increasingly choosing larger funds for their investments. This trend has emerged despite data illustrating that smaller funds, on the whole, outperform their larger counterparts by approximately 3%.
How, therefore, do we bridge the gap so that smaller funds can benefit from the stability of larger investors; and so that investors in larger funds are able to improve their rates of return? Stabile is right to point out that the industry fee model has to change and smaller funds need to be more savvy. I would go further, however, to suggest that to invest in the more exciting deals and to reap greater rewards, larger investors need to be prepared to put in the time to build stronger relationships with their smaller counterparts.