Big funds may have edge over smaller ones if factors other than performance taken into account

Size dilemma

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A plethora of research has long shown small hedge fund managers outperform their large counterparts over the long term. Investors have been listening. The investment pendulum is starting to swing towards smaller managers.

However, in an environment of continued market stress and legislative uncertainty, the case for allocating more to smaller managers is far from black and white.

For one thing operational risk cannot be ignored. Evidence shows larger funds have the edge when markets are stressed.

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