According to Dutch hedge fund incubation platform, IMQubator, smaller and younger hedge funds are better suited to the current market conditions.
It cited a new report by PerTrac, Impact of Size and Age on Hedge Fund Performance: 1996 – 2011, as evidence for the view that smaller, newer funds will do better in a low interest rate, low growth environment in developed markets. The report stated that funds with assets of less than $100 million have outperformed large funds, with assets over $500 million, in 13 of the last 16 years. IMQubator CEO and founder Jeroen Tielman commented on the findings: “It’s clear that speedboats are better equipped to explore and navigate the unknown, uncharted waters that make up the ‘new normal’ of the current political and economic environment. The present economic climate favours the quick and nimble and might punish the large, slow and cumbersome.”
Tielman added that institutional investors need to allocate to more nimble funds with multiple return drivers and better transparency and governance. In addition, he said that by investing in early stage hedge funds, investors can achieve a better alignment of interests with new managers, eager to prove themselves and earn good returns, and also better diversification. IMQubator was set up by Dutch asset manager APG which handles the assets of giant Dutch pension fund ABP.