Direct investing, long the purview of Canadian and Australian pensions and superannuation funds, has increasingly become the apple of many an investor’s eye. In theory, these investors, seeking to get out from under the fees and controls that come with making commitments to investment funds, create a fund management team of their own, internally. They hire staff and create departments that mirror those of the investment fund managers as closely as they can, and then research and make and manage investments themselves.

The successful ones tout the benefits of such an approach, and those without such a program can become envious. But has direct investing lived up to its promise? Does the cost and opportunity costs of staffing an internal investment team with all the associated supporting departments — legal, human resources, administration — outperform a team that outsources most of its investment capital to third-party managers?

“Large investors often claim that