Boutiques raise questions about investor research

Boutique fund managers have questioned the results of research released by Datamonitor showing that 80 per cent of independent investors would only buy assets from large institutional companies, calling the results surprising.

Ross Youngman, chief executive of Five Oceans Asset Management, said many boutique investment houses were getting good, consistent inflows from investors.

“There is something to be said for the stability of players who position themselves on their name, but for a discerning investor wanting to know who is best positioned to perform, I would say the incentives and alignment in a boutique structure – with the right backing – results in better performance,” he said.

According to the Datamonitor report, more than 80 per cent of investors with $50,000 to $250,000 in liquid assets would only buy funds from a large “established company”. A spokesperson from Datamonitor later stated the company was referring to the big four banks, Macquarie, AMP and Perpetual.

The research also found that three out of five investors in the $50,000 to $250,000 band would manage their own investments without a financial planner.

Pengana Capital fund manager Steve Black said the results of the survey surprised him.

“I guess what you’d have to conclude is that those investors who aren’t getting financial advice themselves are probably going to be more influenced by marketing campaigns by the big fund management groups, which you see on TV,” he said.

However, Black said that claiming that three out of five investors with $50,000 to $250,000 didn’t use a financial planner was questionable, because the impact of the global financial crisis (GFC) would have encouraged the use of advisers.

“That suggests that there’s an enormous opportunity for financial planners. But you’d imagine over time that that number would reduce, given what has transpired through the GFC.”

Most of Pengana’s inflows come through financial advisers, Black said.

Wingate managing director Farrel Meltzer also questioned the findings. “That’s not my observation,” he said.

Smaller investors such as those mentioned in the report tend to use financial advisers, and advisers would use any fund manager that had sufficient research ratings, including boutiques, Meltzer said.

The Australian director of T. Rowe Price, Murray Brewer, said the finding was a reflection of the perceived safety of the big brand companies for investors.

However, Brewer warned that the best fund performance wasn’t always found in the big established players.

Anthony Pesutto, marketing manager for Legg Mason Asset Management, said direct investors didn’t have the level of research that financial planners had to make comparisons between investment products, and the brand safety of the large fund managers could therefore be a key driver in their decision.