The case for boutiques: survey of boutique asset managers
Bayes and IIMI asked Independent 'boutique' asset managers what they saw as their advantages in an increasingly centralised market place - and their challenges.
Independent “boutique” asset managers believe their agility, specialist focus and client alignment distinguishes them from larger competitors, new research shows.
Andrew Clare, Professor of Finance at Bayes Business School (City St George’s, University of London) and the Independent Investment Management Initiative (IIMI) surveyed 87 mainly European boutique asset managers last year.
Nearly per cent of the firms surveyed employed fewer than 100 people, with one third having fewer than 10 full-time staff. While around a quarter oversaw investments of between $10 billion and $50 billion, nearly half managed assets below $1 billion.
The asset managers believe they draw competitive advantage from:
- Their independence
- Focussing on a few sectors
- Alignment of their interests with those of their clients
- Their agility/adaptability.
On the flipside, boutiques are most concerned about distribution, the ability to achieve a critical mass for larger allocations, and promotion by consultants. Respondents complained that although performance-related fees helped them align their success with that of their clients, investment platforms were often not willing to accommodate such fee structures.
Professor Clare said it is important to understand what impact the ongoing centralisation of the asset management industry is having on smaller firms and investors.
The top 100 fund managers accounted for $92.8 trillion of the $120 trillion assets under management (AUM) last year. We need to understand what this means for new entrants – who often bring innovation – and for the millions of investors the industry serves.
Sebastian Stewart, Chairman of the IIMI, and a Bayes MBA alumnus, said: “After years of industry consolidation and mass migration to passive and semi-passive strategies to harbour larger pools of capital, the role of specialist asset managers has never been more important in offering opportunities to diversify, outperform indices and ultimately de-risk portfolios. Having identified a boutique asset management premium, we now have hard data to better understand the characteristics that give specialist asset managers an edge.”
Dani Hristova, CEO of IIMI added: “This research highlights how valuable it is for clients, allocators and the industry more broadly to consider the merits of boutique asset managers. The defining features of these companies as outlined in this paper provide reassurance to the industry that boutique firms are consistently driving forward a ‘client-first’ culture.”
The survey report is available here.
