Many investors naturally gravitate towards large, well-established funds and institutions, assuming that their size equates to better performance. However, recent studies and historical data show that smaller hedge funds, like Makarios, often deliver better returns. In this post, we’ll explore why smaller funds tend to outperform their larger counterparts and how this dynamic can benefit investors seeking more agile and focused strategies.

One of the most significant advantages that smaller hedge funds have over larger institutions is flexibility. Large funds often have billions of dollars under management, meaning they must make substantial moves to generate returns, which can limit their agility.

"At Makarios Hedge Fund, we are able to move in and out of positions quickly, taking advantage of market inefficiencies and short-term opportunities that larger funds simply can’t exploit. This flexibility allows us to react swiftly to market changes, while larger funds are often bogged down by their size, unable to move quickly without disrupting the market itself."

Smaller hedge funds often focus on niche markets or specialized strategies, allowing them to capitalize on opportunities that may be overlooked or deemed too small by larger funds. This focus enables smaller funds to find high-quality opportunities that fly under the radar of larger institutions.

Example:
"Where larger funds are focused on broad strategies or major asset classes, we at Makarios can dive deep into specialized areas like swing and position trading in stocks, indices, and futures. Our focus on supply and demand zones, combined with our use of data from tools like COT reports and seasonality trends, allows us to capture opportunities that bigger funds might not even notice."

Another key reason smaller funds outperform is the alignment between fund managers and investors. In large funds, managers may be distanced from the outcomes of individual trades or strategies due to the sheer scale of operations. In contrast, smaller funds often have skin in the game, meaning that the fund’s success is closely tied to the personal interests of the fund managers.

Example:
"At Makarios, our success is directly aligned with yours. As a smaller hedge fund, we are personally invested in the performance of the fund, ensuring that every decision we make is focused on maximizing returns while managing risk carefully. This alignment of interests leads to a higher level of accountability and often better results."

Large institutions often have a complex array of investments and departments, which can dilute focus and lead to less efficient risk management practices. Smaller funds, on the other hand, can concentrate on fewer positions, allowing for more focused risk management.

Example:
"While larger funds may have hundreds of different positions spread across the globe, we maintain a concentrated portfolio that allows us to give each position the attention it deserves. This tighter focus on individual positions means we are able to manage risk more effectively and respond to market movements with precision."

Several studies have shown that smaller hedge funds consistently outperform larger ones, particularly in volatile markets. According to data from hedge fund research firms, smaller funds often generate higher alpha—returns above the market average—because they can be more nimble and take on opportunities that are not scalable for bigger institutions.

Example:
"Recent research has shown that funds managing under $1 billion in assets tend to outperform larger funds, particularly in volatile markets where flexibility and speed are critical. This outperformance is driven by the very things that make smaller funds unique: agility, focus, and the ability to exploit market inefficiencies."

For investors looking to maximize returns while benefiting from a more personalized approach, smaller hedge funds present an attractive option. At Makarios Hedge Fund, we take pride in the fact that our size is an asset, not a limitation. Our ability to move quickly, focus on specialized strategies, and align our success with yours means that we can deliver results that larger institutions simply can’t match.


Ready to learn more about how a smaller hedge fund can outperform the big players? Contact us today to discuss how Makarios Hedge Fund can help you achieve your financial goals, or subscribe to our blog for more insights.