Money managers with less assets under management delivered stronger performance with less volatility than their larger counterparts over a five-year period, according to a Northern Trust Global Advisors analysis.
In a study of five-year investment performance through 2008 of 476 active domestic core equity strategies managed by 282 firms, Northern Trust found that one-third of firms in the top quartile of performance had less than $2.6 billion in AUM, according to a news release from Northern Trust.
Small firms in aggregate outperformed the S&P 500 six times out of eight in down-market quarters and outperformed the index by an average of 51 basis points per down-market period— better than any other group in the Northern Trust study.
The median small manager outperformed the median large firm (with more than $100 billion in AUM) by 41 basis points in each year, the news release said. On an equal-weighted composite basis, small firms lost an annualized 0.74% in each year vs. -1.23% for large firms, with an annualized standard deviation of 13.9% for small firms compared with 14.7% for the largest firms.
Northern Trust Global Advisors is the multimanager arm of Northern Trust.