However, even when armed with a purity of purpose and a strong track record of their work for a prior employer, managers that leave big firms to start their own still have plenty to prove. "We like to see a [spinoff] be well-planned and -financed, with a cushion to support themselves as the firm gets up and running," says Brian Clark, a Principal in Manager Research with Mercer Investment Consulting in Chicago. His firm also will back small managers, but he says it is not a blanket view: "Founders of firms realize they will be busier and have to do a lot of hand-holding and selling to build their businesses. We like the situation better when the investment managers don’t have to give up too much time to non-investment parts of the business."
Managers setting out on their own thus need to prepare for years of 150% effort and trace amounts of reward: "This is the only business where you have to build and run a company successfully for five years before anyone will hire you," remarks Andy Wyatt, Founder and Chief Executive of Cornerstone Capital in Bloomington, Minnesota. (Cornerstone, another high-achieving young firm, is profiled for its acumen as a manager in the large-cap U.S. growth style in this month’s "Head of the Class" feature)
Two of this year’s class of PLANSPONSOR Best Managers run quantitative portfolios, while the other relies on old-fashioned detective work. All three of this year’s Best Managers class moved to a small-firm environment from large firms although, in one case, much of the pick-and-shovel work was already done, as the new firm was spun off from a large bank’s investment operation and is still owned by the same parent.