Institutional or Entrepreneurial Management?

An analysis of organizational factors and their effect on manager performance.

by David Finstad

Conventional investment manager selection emphasizes an analysis of the “Ps”: philosophy, process, portfolio and performance. This paper presents an alternative approach that could be used instead of, or in addition to, traditional methods. Four factors are identified as significant in explaining an investment manager’s performance: high Employee Ownership, low Personnel Turnover, small Portfolio Size, and an investment process that de-emphasizes Top-Down allocations. The first three of these factors are much more aligned with entrepreneurial organizations than they are with larger, institutional types of firms, while Top-Down is aligned with neither. By focusing on these key organizational factors, you may not win the World Series, but you may uncover some superior managers.