3: Graduations Really Do Happen
Manager C is a minority-owned investment firm. Manager C manages a variety of private equity and fixed income strategies. The manager was initially hired by Progress to manage a small cap strategy for a large public fund. At the time of hire, the manager had $3 billion in assets under management. They were subsequently hired by Progress to manage a large cap strategy for the Progress 21st Century Fund.
The firm’s founder and CEO did an admirable job of leading and building his company and its product line. In particular, this firm demonstrated an ability to successfully launch new investment products. As a result, the company grew well beyond the $3 billion in assets at the time of hire. This success catapulted the firm beyond the widely accepted AUM criteria for emerging managers.
Consistent with Progress’ graduation guidelines and recommendations, Emerging Manager C graduated from the first fund to a direct assignment with a large public fund and more recently due to continued phenomenal growth, graduated from a Progress Comingled Fund.
Manager C continued to grow very rapidly after we initially funded the firm: they did an exemplary job of managing their internal growth. With Manager C Progress learned that some firms can successfully handle growth while others can be adversely affected by it. This firm succeeded because of strong leadership coupled with strong organizational infrastructure. Another lesson learned is that strong organizational capabilities, coupled with a highly viable alpha engine allow a manager to launch other strategies successfully. The initial Progress allocation to this manager, for example, was not in its core product.