Boutiques need to act like institutions
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Boutique fund managers must build sustainable business models that mirror the infrastructure of institutional fund companies for their businesses to survive, according to the chief executive of Bennelong Funds Management, Jarrod Brown.
Speaking on a panel of boutique fund managers at the Financial Planning Association national conference, Brown said boutique funds management companies needed to invest in an infrastructure that provided for a research house, an asset consultant, an institutional investor and an adviser, which would mirror institutional fund companies.
"You need capital behind you, you need governance structure, you need all of the infrastructure that an institution provides in an asset management business, but in a boutique environment," he said.
"It's about sustainable business models, and there are a truckload of boutiques out there which I think just don't stack up.
"We think there is an investment required ... with the comfort that that business is going to be around in five years, irrespective of performance, irrespective of cycles, irrespective of regulatory influence and [the] impact of margins," Brown said.
He called on those responsible for recommending boutiques to investors to do due diligence to understand which business models will still be around in five years' time, regardless of extraneous factors.
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