Private companies like us are typically owned by “insiders.” In our case, these insiders include our founding partners and us as employees. Public companies, on the other hand, sell a portion of themselves via an initial public offering of stock, meaning outside shareholders have claim to part of the business's assets and profits.
In our experience the ideal fund company is both privately owned and investment led. It’s run by professional investors who have a personal stake in the business and make the key decisions. They have the expertise to properly manage money and are driven by investor best interests because they’re investors too.
Think about it. Fund investors, also known as unitholders, want small fees and decent investment performance from the investment products they buy. Shareholders of publicly traded fund companies want big fees and big assets because the more money that can be amassed, the greater their profits. We believe this inherent conflict of interest puts unitholders at a bigger disadvantage. For better or worse, public companies have a duty to maximize shareholder value whether or not they build wealth for their unitholders.
Fund companies guided by sales and marketing divisions also have their drawbacks. Investing can play second string to asset gathering, breeding a mentality more focused on selling something than whether it should be sold in the first place.
Another advantage to investing with a private fund company is that its owners are predisposed to uphold a long-term commitment to the business. Unlike employees who may come and go, owners don’t tend to leave, assuring stability and continuity.
When it came to deciding how to structure EdgePoint, the choice was clear.