RANDS AND SENSE
Up until the last two decades, few investors would risk entrusting their assets to a small management firm, preferring to leave the task of preserving and growing their wealth up to larger, more established asset managers.
However, in recent years, smaller, independent managers have become increasingly popular among investors looking for a different approach. And these smaller firms – commonly referred to as boutiques – are proving themselves a good fit for clients looking for a more nimble approach to investment, backed by high-quality research and investment processes and superior levels of client service.
While their smaller size may initially have seemed to pose a challenge, boutique firms have turned it into a distinct advantage. The fact that they deal with smaller investment values enables boutiques to react more nimbly than larger firms to changing market dynamics. Where market conditions rapidly change, for example, they are able to act faster, thereby taking advantage of opportunities or reducing risk for their clients. Large firms are unable to act with the same speed, due to the huge pools of assets that they manage, while smaller firms are able to sell out of and buy into positions much more quickly. And whereas small and mid-cap stocks would usually add no significant value to larger managers’ funds, they can have a very meaningful impact for boutique asset managers.
As for the question of talent, it’s no secret that many of the country’s most respected investment professionals have moved away from larger firms to establish themselves independently, thus thoroughly debunking the postulate that small asset managers lack the experience and expertise of the larger companies. Boutique managers spend a lot of time researching and understanding stocks, asset classes and market forces. There is no room for a ‘fly by the seat of your pants’ philosophy.
In fact, boutique owners often invest significant portions of their own wealth into their funds, which means that they share their clients’ risks – a clear demonstration of their confidence in the skills and knowledge of their teams. These managers have a personal stake in the success of their funds.
Additionally, and by virtue of the fact that they service fewer clients, boutique managers offer a far superior level of service because they can afford to provide a much more personal level of interaction, building solid long-term relationships on mutual understanding and trust.
For investors seeking a fresh approach and personalised investment solutions, a boutique manager definitely offers an attractive option.
Peter Armitage is chief executive of Anchor Capital.