A follow-up study to the original one conducted 10 years ago confirms that emerging managers outperform their more established peers. The 1995 study by Northern Trust found that about 40% of firms with top quartile performance had less than $2billion AUM – a result that was consistent across all major investment style groups.
 
The latest study, covering the years 2001-2005, once again proved that smaller is better. According to the Chicago-based firm, "Small firms often delivered dramatically better performance in down markets" – and these firms accounted for a mere 1% of the assets in the U.S. market. Larry Jones of affiliate Northern Trust Global Advisors said in a statement that "because of their small size, these firms are often excluded from large institutional manager searches," which typically focus on firms with more than $2 billion AUM. NTGA's Ted Krum adds: "Our research makes a compelling case for the inclusion of these smaller portfolio management companies as part of a larger asset allocation strategy." As Jones says, "Institutional investors may be overlooking potential opportunities to add alpha to their portfolios."