DM Monthly Newsletter – Jan 2017

IN EQUITY MANAGEMENT, SIZE CAN MATTER – Investment management is one of the new businesses in which size can be a detriment. Manufacturers with great scale are able to undercut competition on project bids, huge retailers can secure lower prices from product makers by buying in volume, and large pharma companies often maintain their edge by snapping up smaller competitors with successful or promising innovations. In managing portfolios, though, being big can be a significant hindrance to performance, especially in Canada where our equity markets lack the liquidity of large exchangers. In opening a portfolio position, a manager must not only be sure that the required number of shares can be purchased without flooding the market and driving up price, he or she must think about the possible future exit point and whether there are typically enough shares traded to absorb the holding in a timely fashion.

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