By Tom Bradley

With the release of Malcolm Gladwell’s new book, David and Goliath, there’s been lots of talk about big versus small.

In the Money Managers edition of Benefits and Pensions Monitor, Jeff Brown wrote an article (page 14) pointing out that in the asset management business, the Davids outperform the Goliaths (Canadian equity managers). Jeff has been on both sides of the fence. He is currently the President and CEO of a firm he recently founded, 18 Asset Management, but previously was Chief Investment Officer of Highstreet Asset Management.

He believes there are a number of contributing factors to small managers generating higher returns:

• Better communications and quick decision-making
  
• Smaller trades and lower transaction costs
  
• A higher degree of co-investment (investing along-side their clients)
  
• A larger universe of stocks to choose from

The article confirms my view that managing stocks is an anti-scale business. The bigger you get, the more difficult it is.

It’s cool to be a David. Goliaths are so yesterday.