Lure of boutique funds still strong – survey

The appeal of boutique fund management firms is driving an unprecedented level of key staff turnover at mainstream Australian equity managers this year, according to a Standard&Poor’s (S&P) survey.

The survey found that 34 senior staff within a universe of 38 mainstream Australia equity managers rated by S&P left their jobs over the course of 2007 to date, with 14 managers affected by the turnover — or 37 per cent of the universe.

Of the 34 senior staff departures during the year, 13 left to take up a position at a boutique fund manager, 12 went to other mainstream fund managers and nine “dropped off the radar”.

According to S&P Australian equity sector head Marcus Hanel, prolonged strong returns in the Australian equity market and large fund inflows have enhanced the attractiveness of smaller, more-specialised investment management operations.

“Fewer investment restrictions with boutique operations are attractive for some portfolio managers, who can implement their highest conviction stock ideas without as much focus on benchmark weights.”

However, he said it would “be interesting to gauge the extent to which the staff turnover in Australian equity portfolio managers remains high against the current backdrop of high volatility”.

“In tumultuous market conditions, mainstream firms with big global brands and ample resources provide a safe haven for more mature professionals and an excellent starting point for younger managers.”