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The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns (Wiley Finance) [Kindle Edition]

Brian Bares
4.9 out of 5 stars  See all reviews (9 customer reviews)

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Book Description

A world-renowned money manager shares winning strategies for small-stock investing

Since forming Bares Capital Management, Inc. in 2000, Brian Bares has shown that above average returns can be generated through the careful selection of small company common stocks. Additionally, he's shown how concentrating capital in a handful of ideas improves the potential for outperformance by increasing the depth of knowledge of each position and allowing each security to have a more meaningful impact on the portfolio. In The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks Into Big Returns, Bares describes how endowment-model investors and aspiring managers can gain meaningful exposure to small stocks while sidestepping many of the obstacles that have historically prevented institutional investment in the asset class. The book also

  • Details the historical outperformance of small-cap stocks
  • Contrasts the various strategies employed by managers in the space
  • Explains how aspiring managers can structure a firm to boost performance and attract institutional capital
  • Describes how endowment-model institutions can evaluate and engage outside managers for their small-cap allocations
  • Summarizes important topics such as liquidity and the research process

Bigger is not better. The Small-Cap Advantage reveals that small stocks have historically performed better than large ones, and that lack of competition in small-cap stocks provides diligent managers with a singular opportunity to outperform.



Editorial Reviews

From the Inside Flap

The historical returns of small-cap stocks have exceeded those of mid-cap and large-cap stocks over long time periods. The additional return experienced by small-cap investors has occurred despite inherent disadvantages in the asset class.

The excess return available from small-cap stocks can help large foundations, endowments, and other similar institutional investors overcome the drag of inflation and the drain of annual spending. These institutional investors are in a unique position to fund new and often untested managers who are in the best position to benefit from the return premium of small-cap stocks and from the relative lack of professional participation in the space.

The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns is a must-have book for aspiring and existing small-cap managers and the institutions that would hire them. It is an insider's account of institutional small-cap investing. The book details the investment, fundraising, and operational challenges encountered by small-cap managers. It also:

  • Describes the evaluation issues encountered by institutions in their small-cap manager due diligence

  • Reveals why small-cap stocks are a fertile hunting ground for investors seeking high returns over long time periods

  • Details how top foundations, endowments, and other institutional investors can procure exposure to small-cap stocks through allocations to specialist managers

  • Explores the reasons for small company outperformance and reveals how returns can be further enhanced through the careful avoidance of problem companies

  • Explains why the small-cap space is ideal for active management and why passive indexing may not be an optimal strategy for this asset class

The Small-Cap Advantage helps aspiring small-cap managers understand the state of the institutional investment management industry. It debunks the notion that small-cap managers who lack long track records or high levels of assets under management are undeserving of institutional funding. It explains the fundraising process for aspiring small-cap managers and how they can handle many of the challenges that come with successfully increasing strategy assets.

The Small-Cap Advantage provides endowment-model institutions with a deeper understanding of the unique issues faced by specialist boutique managers who focus on the small-cap space. It will also assist institutional due diligence teams in their evaluation of small-cap managers.

From the Back Cover

"The historical advantages of small-caps as an asset class are well documented, but not realized by profit-maximizing managers who allow asset bloat, nor by institutions who follow their peers down the beaten path to invest with such managers. Brian Bares is willing to speak the hard truth about small-cap investing: market-beating returns are generated by managers who cap assets and concentrate."—Patrick Dorsey, Director of Equity Research, Morningstar; author, The Five Rules for Successful Stock Investing and The Little Book That Builds Wealth

"Brian Bares is the Warren Buffett of small and micro-cap stocks, and his book, The Small-Cap Advantage is a masterpiece of practical, Buffett-like wisdom. Whether you are a new investor or have been in the markets for decades, you will find this book full of insights!"—D. Ellen Shuman, VP and Chief Investment Officer, Carnegie Corporation of New York

"Brian Bares is a rare breed of professional investment manager. He excels in the requisite skills of investment acumen, hard work, and discipline while remaining philosophically grounded as a true 'clients first' fiduciary of his investors' capital. With The Small-Cap Advantage, Brian has written in a clear and accessible manner the most comprehensive 'how to' book available for anyone interested in becoming a small-cap manager, or hiring one."—Thruston Morton, CEO and CIO, Global Endowment Managements

A world-renowned money manager shares winning strategies for small-stock investing

Bigger is not better. Since forming Bares Capital Management, Inc. in 2000, Brian Bares has shown that above-average returns can be generated through the careful selection of small company common stocks. In The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns, Bares reveals how endowment-model investors and aspiring managers can gain meaningful exposure to small stocks, while sidestepping many of the obstacles that have historically prevented institutional investment in this asset class.


Product Details

  • File Size: 628 KB
  • Print Length: 212 pages
  • Page Numbers Source ISBN: 0470615761
  • Publisher: Wiley; 1 edition (January 19, 2011)
  • Sold by: Amazon Digital Services, Inc.
  • Language: English
  • ASIN: B004KKY1EW
  • Text-to-Speech: Enabled
  • X-Ray:
  • Lending: Enabled
  • Amazon Best Sellers Rank: #99,297 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

Most Helpful Customer Reviews
5 of 6 people found the following review helpful
5.0 out of 5 stars A Small Gem January 28, 2011
Format:Hardcover
This well written book should be on the reading list of financial planners, individual investors, aspiring money managers and institutional investors looking to understand the world of small cap investing and how to capture the significant opportunities therein. While the small cap advantage has long been known most literature on the subject has come from academic observers and self serving industry participants. Bares provides a welcome perspective from an independent money manager who has been providing impressive excess returns to his clients over the past ten years. In this age of so much corrupt corporate governance it is refreshing to see that there are those in the financial industry that do put the interest of their clients first and are achieving notable success in doing so. For those with the patience, skill and integrity to follow the precepts outlined in these pages there is wealth to be mined.
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2 of 2 people found the following review helpful
5.0 out of 5 stars Well written and informative February 1, 2011
By Jeff
Format:Hardcover|Verified Purchase
Brian Bares' book, the Small-Cap Advantage, was a great read for anyone interested in small-cap investing. The content is innovative and informative, but easy to understand and digest with clear examples and visuals. Small caps seem to be overlooked or ignored by many, and the inefficiency created by this creates a powerful advantage for anyone willing to do their homework and focus.

Like other experts whose opinions I trust, the author avoids any sense of investing magic or super-systems. Rather, he focuses on an under-served (and therefore inefficient) market and then does his homework to make investments.

For anyone interested in learning more about the competitive advantage that can be achieved with a focus on this area, I'd highly recommend it.
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4 of 5 people found the following review helpful
5.0 out of 5 stars Best Book on Small Cap Value Investing January 21, 2011
Format:Hardcover|Verified Purchase
The Small-Cap Advantage is a must read for anyone intent on generating superior investment returns in an area of the market that frequently flies below the radar of large investment funds. Brian Bares takes the reader through all the issues a professional investor focused on small caps is likely to encounter, dispensing invaluable data and advice in the process. I can't imagine anyone better to write this much-needed volume than Brian Bares, one of the most highly regarded small-cap "superinvestors" of his generation.
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1 of 1 people found the following review helpful
5.0 out of 5 stars Unbelievable book June 12, 2012
Format:Hardcover|Verified Purchase
The Small-Cap Advantage, written by Brian Bares, describes the historical outperformance of small-capitalization stocks, and more importantly, clearly lays out the reasons why this has occurred. Although I work in the financial industry, I was amazed to learn the nuances of this asset class that might not be apparent to most investors. The book also spends a decent amount of time discussing the issues and challenges of running a small-cap long-only or hedge fund. These pressures include implicit and explicit trading costs.
Whether you are new to finance or an experienced professional, this book will serve you well.
All-in-all, Bares put together a great book. He has clearly has been influenced by the famous deep-value investors such as Greenblatt and Buffett. I would highly recommend that you give this short book a long look.
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Format:Kindle Edition
The book has very interesting things about small caps, but IMHO its core is aimed to those who want to pursue or are already beginning a career as a professional Fund managers, and this is so because Bares outlines the pros and cons of some of the most basic and important themes that every Fund manager has to deal with before they even start to operate and after that.

I think the title falls short of all the things we can get from this book. Even though Bares talks about Small caps, its advantages and some interesting tricks, the truth is at least for me, the book is kind of a road map for all those aspiring to become fund managers and to start with the right foot because there are a lot of important things that we must consider before start managing other people's money, and Bares talks about almost all of them in a very nuanced way. I believe that the principles and advice in this matter can be implemented to a wide variety of strategies for those starting in this path.
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More About the Author

Brian T. Bares, CFA, is a research analyst with Bares Capital Management, Inc. He founded the firm in 2000 with the belief that concentrated portfolios of inefficiently priced small companies could lead to high relative compounding. His firm manages institutional portfolios of small-cap and micro-cap common stocks in long-only, replicated separate accounts. Mr. Bares began his career by working his way up from the bottom. From compliance and operations, to trading and portfolio management, he garnered experience in nearly all aspects of running a boutique small-cap manager before starting his own company. He graduated from the University of Nebraska with a degree in Mathematics. His investment philosophy and strategy have been profiled in Value Investor Insight and The Manual of Ideas--Portfolio Manager's Review. Mr. Bares holds the Chartered Financial Analyst designation and is a member of the CFA Society of Austin. He resides in Austin, Texas, with his wife and three sons.

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