The managed futures space continued to struggle to post enticing returns in 2013, but Silvercrest Asset Management’s Mike Dubin says that has not kept his firm from looking for emerging manager talent in the space.
Dubin, who spoke at the Emerging Manager Forum in Miami in December, says the research shows that smaller emerging managers have continued to outpace larger funds by 2 percent to 4 percent per annum. There have been a number of studies which have concluded that smaller funds posting nice returns tend to perform poorly going forward when they have large pools of capital to manage and invest.
Such research is opening the doors for smaller funds, Dubin said, which traditionally have struggled to garner investments from large investors, pension funds, endowments and others.
“They have a larger space they can play in,” Dubin said. “Their opportunities are stronger. They are more nimble and can handle the environment better.”
The trouble for smaller managers, however, is that they often do not have the infrastructure and marketing channels in place to attract larger institutional money. And the problem for larger institutions, is the ability to do the necessary due diligence on smaller funds to determine which are the best fit for their portfolio needs.
Dubin’s firm has been trying to address that disconnect with a new program that does the due diligence on the small firms. Silvercrest has built a portfolio of 15 managers, with a an initial target of $50 million to get the program started.
“One of the great things about smaller managers is that they often grow up as a team and have great trust in one another,” said Dubin, but added that many of those firms need to create a “separation of duties as they become larger funds.”
“So some of these operations due diligence reviews (from Silvercrest) can help them with the things they ought be doing better,” he said.