Manager selection crucial with boutiques

By Rebecca Evans

THE ability of small managers to outperform their larger counterparts is cementing the place of boutique funds in client portfolio construction, but Assirt Research is warning dealer groups to do their homework before investing in this growing sector.

In its inaugural Boutique Managers Report, Assirt claims the performance dispersion between good and bad managers is significant and highlights the importance of manager selection.

“Just because they are small doesn’t mean you are going to get great returns,” an Assirt senior investment analyst says.

The research house says the aim of looking at the sector from an industry perspective is to help financial planning dealer groups gain a better understanding of the boutique marketplace.

“It was definitely an objective, as there are a lot of boutique managers in the marketplace — and different types of managers within the sector,” Assirt says.

“Boutique funds have the potential to offer strong investment returns. They may be able to capture opportunities that might have been missed or passed over by larger managers.”

The research house says a major risk of boutique managers going forward is the willingness of their key personnel to relinquish capital to their less senior staff members.

“Sometimes it’s not apparent that the person starting off the [boutique operation] likes to keep control, thus you see turnover in staff.”