Independent ‘boutique’ asset managers believe their specialist focus distinguishes them from larger competitors, new research shows.
Bayes Business School and the Independent Investment Management Initiative (IIMI) conducted a survey of 87 mainly European boutique asset managers last year. Around 88% 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 $10bn and $50bn, nearly half managed assets below $1bn.
The research found that boutique asset managers see their independence as key to their competitive advantage. The firms surveyed said their agility and their ability to focus on a small number of strategies gives them an edge.
Respondents argued that performance-related fees helped them align their success with that of their clients, but that investment platforms were often not willing to accommodate such fee structures.
Their main concerns at present include distribution; the ability to achieve a critical mass for larger allocations; and promotion by consultants. For more mature businesses, succession is a significant issue.
Andrew Clare, professor of finance at Bayes Business School, said it is important to understand what impact the ongoing centralisation of the asset management industry is having on smaller firms and investors.
He said: “The top 100 fund managers accounted for $92.8trn of the $120trn assets under management 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 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.”
Read the full survey here.
