Public Investors’ Tepid Embrace of Emerging Managers

sovereignwealth_transactionsAllocating capital to emerging managers is time consuming, but the possibility to find new, innovative asset managers is forcing public investors to reassess their current allocation. In some instances, emerging managers are at the forefront of innovative investment vehicles, capitalizing on specific themes, industries or trends. In the last few years, energy funds enjoyed popularity from sovereign wealth funds and public pensions. For example, in early February 2012, the China Investment Corporation (CIC) invested in a minority stake in EIG Global Energy Partners.

Why emerging managers?
Emerging managers tend to be entrepreneurial. With a flat management structure, the absence of bureaucracy enables agility and quick response in regard to organizational and business decisions. In addition, compensation schemes at emerging managers tend to have superior alignment of personal, professional and economic interests.

Public investors must utilize industry contacts, conferences and other channels to access promising managers.

Not all public investors have been triumphant with emerging managers; it has been a learning experience. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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