Rising Star: Integrity takes flight with robust structure

While good returns help the survival of a boutique manager, a good capital base and back-office are the keys to long-term survival.

These attributes were part of the criteria that Lonsec used to select the winning manager in this category, Integrity Investment Management.

Lonsec general manager research Grant Kennaway said the manager had to establish a robust business structure.

“We were looking not just in terms of good investment people, but also adequate resources to run a successful back-office, either internal or outsourced,” he said.

“They were also needed to have strong qualitative momentum in terms of people and investment process while producing solid investment returns to date.”

Integrity managing director Paul Fiani said good people and stability in the business was essential.

“We have been going for two years and we have only lost one person during that time,” he said.

“And that was because her husband was posted to London.”

Fiani said the manager’s stability reflected a robust structure established at inception.

“Our structure is 100 per cent owned by key staff and all profits go to these personnel,” he said.

“We sit in a good position with our structure and that is reflected in our returns, which have been in the top quartile.”

The Integrity Australian Share Fund achieved a gross one-year return of -20.09 per cent compared to the benchmark for that period of -29.80 per cent.

These are times when fund managers measure their performance in degrees of negativity and those closer to zero are considered the stronger performers.

Fiani said the strong performance had continued the trend of investors choosing boutique managers rather than the traditional institutionally owned businesses.

The fact that many boutiques have proven to be stable organisations also delivered credibility to this segment of the funds management arena.

“The trend for investors to use boutiques has not changed despite the economic outlook,” Fiani said.

“Many research houses are still backing boutiques for investment choices.”

Building a strong brand with a robust business was another key to attracting investment inflows.

Magellan Asset Management company secretary Leo Quintana said the business had been built to grow and attracted some significant shareholders such as the Packer family.

“The company can handle more investments with the same team of 23 staff with a low turnover,” he said.

“If you are successful, then staff will want to stay with you and they feel confident in the business.”

Good relationships with staff are not the only element of running a successful boutique manager though, maintaining investor confidence is also crucial.

Building a long-term sustainable business is the goal of boutique manager, Five Oceans Asset Management, chief executive officer Ross Youngman said, as well as a business that can withstand economic downturns.

“You have to look at a long-term business that is sustainable if you want to attract investors,” he said.

“It has to be a model that can be tested in all economic climates.”

Five Oceans has seen staff numbers grow from five to 11 and has also seen Challenger take a 25 per cent stake, which again helps boost market confidence in the manager.