News

Track Records Optional: Cambridge Searches for Untested Talent

FundFire

Global head of investment research Noel O’Neill explains Cambridge Associates’ rigorous approach to diligencing and sourcing new and emerging managers. Key excerpts of this interview include:

  • “…There are a lot of people in the investment consulting business who use track records as a screening tool and obviously with emerging managers that are in-between five-year track records generally won’t pass that screen… Our approach to finding compelling investments doesn’t start with historical performance screens.”
  • Part of the attraction to these managers is their smaller-size. “You’re typically getting in situations where asset size is much smaller than with well-established managers… It can be a competitive advantage by allowing them to invest in inefficient and less-traveled segments of the market.”
  • O’Neill and his team also look for the same qualities as they would with any other investment firm like a coherent strategy, organization, team and good alignment of incentives. “At the end of the day what is the secret sauce and what truly differentiates the firm from others, even more so than regular firms,” he says.
  • “We’ve had a lot of success convincing our clients that newer firms are compelling places as long as they demonstrate capability.”
  • Once the team has identified the managers they want to work with, “we can eventually fund them and convince our clients that they can being them enough capital to put them in business.” That factor has given Cambridge leverage to negotiate fees, terms and incentives, he says.

Read the full article here.