Manager Trade-Offs: Scale vs. Specialization
Manager Trade-Offs: Scale vs. Specialization
As alternative investments become increasingly important to maintaining a diversified portfolio, advisors face a critical question: who should manage those investments? In an increasingly crowded field of strategies and managers, we believe selecting the right team is as important as choosing the asset class itself.
Are “household names” safer bets, or just more familiar? Can newer managers actually deliver higher returns? Do specialized managers bring something differentiated to the table? There are many questions and no shortage of choices.
To simplify things, we think of manager experience in three categories.
- Established Giants: These large firms have vast resources and multiple strategies. While institutional “smart money” often provides implicit vetting, opportunity and alignment of interests can weaken as teams mature and mandates shift.
- Emerging Managers: Though they may lack a long track record, newer teams may offer fresh perspective, attractive terms, and access to untapped opportunities with outsized returns.
- Niche Specialists: While not “household names,” niche managers often have long track records in specialized, high-conviction strategies.
Emerging managers’ potential to deliver outsized returns is not just hypothetical. While past performance is not indicative of future results, an analysis of private credit managers by PitchBook shows that emerging private credit managers outperformed their established counterparts, with the top-performing emerging managers of 2007-2018 vintages surpassing the returns of larger, more recognized firms.1,2
We believe a key driver of outperformance among smaller managers is their ability to access less crowded segments of the market, sectors where competition is lower and upside potential is greater. That said, smaller managers can carry higher counterparty risk and may face challenges with uneven execution, making thorough due diligence essential. However, when these smaller managers combine deep focus, disciplined execution, and strong institutional backing, they present a compelling opportunity for investors seeking diversification.
Arixa Capital: The Best of Both Worlds
We view Arixa Capital as a hybrid: a smaller manager with a highly established, 15-year track record. We are a real estate credit specialist focused on a growing niche with proven discipline, a consistent track record, and a trusted name in its space. A few things we believe make Arixa unique:1,3
- Longevity + consistency: Over 15 years of delivering real estate credit performance with no principal loss across Arixa’s retail funds.
- Focused strategy: Senior secured loans for financing the acquisition, renovation, and/or construction of residential and multifamily investment projects.
- Institutional backing: Arixa is supported by leading institutional investors and has been thoroughly vetted by public pension funds, RIAs, global investment managers, and warehouse lenders as part of their due diligence processes.
Why It Matters to You
With record public market valuations and heightened uncertainty, alternative strategies like Arixa’s can help provide diversification and stable monthly income.
For over 15 years, Arixa’s retail funds have generated:1,3
- Stable income: 180+ consecutive months of positive returns
- Capital preservation: No principal loss to retail fund investors over 15+ years
- Investor-friendly liquidity: Quarterly redemption rights of 25% after a 1-year lock-up4
Our approach is designed to provide strong downside protection and reliable performance across market cycles.
Let’s explore this in more depth and walk through how Arixa might complement your allocation strategy. Please reply to this email or schedule a meeting with me through my Calendly link.
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Connor Grosskopf, CFA Vice President, Investor Relations |
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Arixa Capital’s funds are only open to accredited investors as the term is defined by the Securities Act of 1933 under Rule 501 of Regulation D. Generally speaking an accredited investor is an individual who individually, or jointly with a spouse, has a net worth that exceeds $1 million, excluding the value of the primary residence. A person may also qualify as an accredited investor with an income exceeding $200,000, or $300,000 jointly with a spouse, for each of the two most recent years and a reasonable expectation of the same level of income in the current year. This webpage does not constitute an offer or solicitation to purchase interests in any Arixa-sponsored fund nor any related or associated entity. Any such offer or solicitation will be made solely through the respective fund’s governing documents and private placement memorandum or similar formal investment documentation, in strict accordance with the terms of all applicable securities laws and regulations.
1 Past performance is not indicative of future results. An investment's past success does not guarantee it will perform well in the future, due to changing market conditions and unpredictable factors. While historical data can be useful for evaluation, it should not be the sole basis for investment decisions, and investors should carefully consider other factors like market fundamentals, diversification, and professional advice to form a well-rounded investment strategy.
2According to a report by PitchBook, “Establishing a Case for Emerging Managers,” published April 2024.
3These historical performance metrics refer to the Arixa Secured Income Fund and the Arixa Enhanced Income Fund.
4After 12-month lock-up period, investors may request 25% redemption per quarter. This information is presented as a high-level summary and is qualified in its entirety by the PPMs and operative documents for the Arixa Secured Income Fund and the Arixa Enhanced Income Fund.
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