As featured in Emerging Manager Monthly
The domestic growth equity team at Essex Investment Management has seen its total asset base nearly double to $195 million as of July 31, 2017 from $100 million in 2015, Co-CEO and Senior Portfolio Manager Nancy Prial said. The exponential growth coincided with the hiring that same year of third-party marketer Arrow Partners, which has assisted the team in delivering its message to potential clients, refining its message and digital content, crafting pitches and producing visual materials for consultants and client meetings, Prial said.
“They’ve been very instrumental in getting us out there,” Prial said. “We consider ourselves an undiscovered firm in many regards, or a firm that needs to be rediscovered.” The recent growth is exponential given the Evanston, Ill.-based team’s small-cap, small- to mid-cap growth and micro-cap growth strategies have been around for decades; the small and micro-cap strategies launched in 2000 and the smid-cap strategy in 1986.
The small-cap growth strategy has experienced the greatest dollar-value growth. It has $145 million in assets today, while the smid-cap growth and micro-cap growth strategies hold down approximately $36 million and $15 million, respectively, Prial said. “Although we like all three of our strategies, we thought there was probably the best near-term opportunity in small and micro and that smid would be a longer-term growth opportunity,” she said.
While small-cap has gained the most momentum thus far, the smid-cap growth strategy has maintained long-term outperformance and the micro-cap growth strategies have great potential to attract more investor interest moving forward, Prial said. “There’s a tremendous amount of room to add alpha,” Prial said. “In many ways the micro-cap market is where the small-cap market was in the 1980s – much less developed institutionally and certainly much less followed.” Arrow’s influence has also had a significant impact on the team’s standing in the emerging manager-of-managers space, Prial said, noting the firm has helped to “continue and expand those relationships.”
Most recently, the team secured a $7 million small-cap growth investment with the Atlanta General Employees Pension Fund through manager-of-managers Legato Capital Management in the second quarter. Prial emphasized that the Essex strategies should appeal across the investor landscape, noting that the team has secured a number of direct mandates since its inception.
“We really think we should appeal to a broad variety and type of clients as we have in the past,” Prial said. “We have some different vehicles. Some separate accounts and a mutual fund that should accommodate smaller funds.” For now, the firm will move forward with its recent success and the relationship with Arrow to build on its current growth. “To continue to get our story out there,” Prial said when asked about the firm’s next steps. “Get better known, have people recognize our process and continue to grow.”
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