The small-cap advantage : how top endowments and foundations turn small stocks into big returns

74 Pages·2011·0.64 MB·English

by  Bares

Contents
Cover
Endorsement
Series
Title Page
Copyright
Dedication
Introduction
Acknowledgments
Chapter 1: The Small-Cap Advantage
TWO SOURCES OF OUTPERFORMANCE
SMALL-CAP DEFINITIONS
THE OUTPERFORMANCE OF SMALL-CAP STOCKS
OUTPERFORMANCE WITHIN THE SMALL-CAP
SPACE
Chapter 2: Small-Cap Disadvantages
RESEARCH
TRADING
THE SMALL-CAP GRAVEYARD AND REVERSE
SURVIVORSHIP BIAS
CAPPING ASSETS
Chapter 3: Small-Cap Investment Philosophy and
Process
INSTITUTIONAL APPROACH
PASSIVE AND ENHANCED INDEXING IN SMALL-CAP
STOCKS
ACTIVE MANAGEMENT IN SMALL-CAP STOCKS
Chapter 4: Small-Cap Manager Organization
CREATING VALUE FOR THE MANAGER
LAUNCHING A SMALL-CAP FIRM
INVESTMENT TEAM
Chapter 5: The Fund-Raising Process
GENERAL MARKETING STRATEGY
INSTITUTIONAL CLIENTS
FOUNDATIONS AND ENDOWMENTS
CONSULTING FIRMS
PENSION PLANS
HIGH-NET-WORTH INDIVIDUALS
WRAP FEE AND OTHER SUBADVISORY
RELATIONSHIPS
DATABASES
THIRD-PARTY MARKETERS
THE CHICKEN-AND-EGG PROBLEM
Chapter 6: Fees, Agency Issues, and Other
Performance Drags
COMMON PERFORMANCE DRAGS
FRICTIONAL COSTS IN SMALL CAPS
INSTITUTION-MANAGER AGENCY ISSUES
AGENCY ISSUES IN TRADING
BENCHMARK TYRANNY
COMMINGLED AND SEPARATE ACCOUNTS
Chapter 7: Small-Cap Managers and the Endowment
Model
THE ENDOWMENT-MODEL APPROACH TO SMALL
CAPS
FINDING AN EDGE
FUNDING SMALLER MANAGERS
FUNDING EMERGING MANAGERS
FINDING EMERGING MANAGERS
Chapter 8: Evaluating Small-Cap Managers
INSTITUTIONAL DUE DILIGENCE TEAMS
ASSESSING MANAGER RISK
ASSESSING INVESTMENT PHILOSOPHY
ANALYZING A MANAGER’S PROCESS
EVALUATING FIRM PRINCIPALS
ASSESSING MANAGER OPERATIONS
CONTRIBUTIONS AND WITHDRAWALS
Final Thoughts
Notes
About the Author
Index
Additional Praise for The Small-Cap
Advantage
“Small-cap investing presents unique opportunities as well as unique
challenges. Brian Bares masterfully details both in language that is
accessible and actionable for investment novices and pros alike.”
—John Heins, Co-Editor, Value Investor Insight
President, Value Investor Media, Inc.
“Brian Bares is a very talented small-cap stock investor, so it is no
surprise that The Small-Cap Advantage is a very worthwhile read. In the
ongoing search for investment added value, investment managers are
smart to heed the small-cap stock market and Brian’s thoughtful
perspectives on investing in these securities.”
—Bruce Zimmerman, CEO and CIO, University of Texas Investment
Management Company
“The Small-Cap Advantage is a must read for anyone intent on
generating superior investment returns in an area of the market that
frequently flies below the radar of large investment funds. Brian Bares
takes the reader through all the issues a professional investor focused on
small caps is likely to encounter, dispensing invaluable data and advice in
the process. I can’t imagine anyone better to write this much-needed
volume than Brian Bares, one of the most highly regarded small-cap
‘super-investors’ of his generation.”
—John Mihaljevic, CFA, Managing Editor, The Manual of Ideas
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Copyright © 2011 by Brian T. Bares. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Bares, Brian T., 1973–