Institutional investors are increasing their interest in emerging money managers as they seek diversity and new talent for their roster.
“A lot of (pension funds) are looking at emerging managers right now, particularly in small-cap and smidcap,” said Keith Robinson, a managing partner with Focus Consulting Group Inc., Chicago, a consultant to money managers.
“The whole idea of diversifying portfolios and looking for new talent opportunities has certainly become much more the practice among institutional investors, rather than the exception,” said Thurman V. White Jr., president and CEO at Progress Investment Management Co., a San Francisco-based minority- and women-owned manager of emerging managers.
Almost every asset owner or governmental entity has a different definition of an emerging manager. Illinois state law, for example, defines an emerging manager as a firm that is minority- or women-owned or is owned by a person with a disability, and has between $10 million and $10 billion in assets under management.
Others say the firm should have less than $2 billion in AUM and often, include the requirement that the firm be owned by minorities, women, veterans or the disabled.
Opportunities among institutional investors for emerging managers appear to be growing.
“You're continuing to see an expansion of potential RFPs to emerging managers,” Scott Dooley, founder and chief investment officer of emerging manager Fusion Investment Group LLC, Pittsburgh, said in a telephone interview. “You originally saw these mandates from the state level. Now, you're starting to see these RFPs trickle down to some of the smaller pension plans. Five years ago when we started, that wasn't the case.”
Fusion has nearly $200 million in assets under management, specializing in global tactical asset allocation.