They’re back: institutions trump boutiques

The glory days of the boutique fund manager are over. Investment managers from the big end of town, particularly BT, were the best performing managers of Australian equities in 2005.

Research prepared for Money Management by Standard & Poor’s reveals that of the top 20 performing wholesale funds for the 2005 calendar year, 15 were institutionally run. Of the top 20 retail funds, 19 were owned by the large managers.

The results follow the release of Intech data that showed boutique managers under-performed the benchmark S&P/ASX 200 index by 0.9 per cent last year, while their larger counterparts beat the benchmark by 1.3 per cent.

Funds run by MIR, Ausbil and Hyperion were the only boutiques making S&P’s list.

In further proof that Westpac-owned BT has cast-off the shackles of a horror start to the millennium, four of its funds, including its ethical fund, made the wholesale top 20, while seven made the retail top 20.

“A lot of boutiques thought the market was overvalued in 2005 and going to fall. They were over defensive and ended up under-performing,” said BT head of equities Crispin Murray.

He said that, unlike boutiques, larger institutions like BT have more staff able to seek out different investment ideas.

“We want to get our performance from a range of sectors and different types of stocks, so we’re not relying on a specific theme right through each year.”

But he and Merrill Lynch senior portfolio manager Matthew Ryland did concede that the institutions had borrowed a little from boutiques.

“Our remuneration structure has certainly shifted to being transparent and performance-based, which just makes you focus on generating good returns.” Ryland said.