Time right for small managers to make it big
Rolling shifts in asset management will push boutique managers to the fore, according to Cameron Harrison Asset Management, which, as Jason Spits writes, has used these trends to launch its own move into the retail market.
In a competitive market, boutique managers have to work hard to get their products in front of advisers. As a result of this, Cameron Harrison Asset Management (CHAM) took the unusual step of making its recent first foray into the retail market by offering access to its international equities fund via a managed accounts database.
The database — the Morningstar Separate Accounts database — as well as the Powerwrap investment platform, Smartwrap, were chosen as the first vehicles to host CHAM's Anglo-Atlantic Mainstreet Equity Strategy which, since 2007, has invested in the best-managed businesses listed on either the FTSE All-Share (UK) or the S&P 1500 Composite Index (US) markets.
The move is part of CHAM's efforts to expand its reach, according to managing partner, Paul Ashworth, who said inclusion on platforms and obtaining ratings for the fund were early stages in increasing the group's exposure to the retail investment and advice sectors.
Ashworth believes there has been an increase in the popularity and prominence of niche and boutique managers over the past couple of years and expects this trend to gain pace going forward.
"There are a number of factors that have driven this trend and they relate to a number of categories that are currently shaping investing and funds management," Ashworth says.
He says the first of these is behavioural, with investors looking to form a connection with their fund managers, which is more easily achieved in a boutique environment.
At the same time, reputational issues — particularly where some larger financial service providers have had issues with unethical behaviour — has tainted the public's view of mainstream managers.
Smaller managers have also been able to benefit from advances in technology that have made it more cost effective to operate as a boutique asset manager. Many are seeing their previous higher costs now lower than their large scale rivals, which Ashworth said has led to improved outcomes for investors.
He also pointed to structural issues within the local market and the dominance of financial and natural resource companies in the ASX200, with exchange traded fund (ETF) investors finding the index no longer offered a broadly diversified portfolio, which is on offer via niche or boutique managers.
CHAM investment manager, David Clark, said the business was well aware of these issues as it has been working through them in preparation for dealing with advisers who will access its funds via platforms and managed accounts.
He said the primary challenge in getting ready to deal with financial advisers was establishing the right framework to manage those adviser relationships.
"As our ‘client', we engage with advisers on the basis of clearly understanding their needs, requirements, challenges and opportunities. This is the beginning of a relationship, which takes time to develop and ultimately receive the initial flow of funds," Clark said.
"Our view is if we get this right and have the right client service program in place for financial advisers from the outset, then challenges, which will occur from time-to-time, are capable of being addressed. It underpins our trust relationship with financial advisers, which allows us to share a depth of information and detail that otherwise we might not."
Ashworth said this interaction with advisers by fund managers will grow in importance and relevance because advisers are becoming more actively involved in portfolio construction and the fundamentals of investing.
"We think the increase in availability of passive investments has meant that planners are becoming more involved in investing client funds. Ultimately this is probably positive," Ashworth said.
"Additionally, the dominance of the banks and resource companies in the ASX200 and their periods of strong performance over the past decade may have encouraged more planners to invest their clients' funds directly.
"The concern is whether in getting more involved in portfolio construction they are undertaking fundamental valuations of bottom-up stock research.
"If an adviser is considering being more actively involved, it is important to have a repeated investment process that considers both the upside and downside when selecting investments."
Cameron Harrison Asset Management
Year manager was founded: 2012 (investment team operated together since 1994)
Number of Employees: 10 (plus an external economic strategist)
Key Personnel:
- Managing Director/Chief Investment Officer: Paul Ashworth
- Investment Manager: David Clark
- Responsible Portfolio Managers: International Equities – John Clark, Australian Equities – Paul Ashworth
Investment styles used: Active, fundamental analysis
Asset Classes covered: UK, US and Australian Equities
Leading Funds:
- CH Anglo-Atlantic Mainstreet Equity Strategy
- CH Australian Mainstreet Equity Strategy
Minimum retail investment amount: $20,000 through Powerwrap
Investment Management Fee: 0.7 per cent (plus GST) of FUM
Research house ratings for fund: Morningstar Quantitative rating – 5 star
Major platforms through which fund is available: Powerwrap, wholesale mandates
Total FUM: $246.7 million
AUTHOR
Jason Spits
Recommended for you
The investment giant has announced a $18 billion deal to acquire a leading US-based private credit manager, marking its third major alternatives deal this year.
Yarra Capital Management has received a top rating for its Enhanced Income Fund from research house Lonsec.
Abrdn’s head of global fixed income sees a favourable environment ahead for bond investors, though he cautions a more selective investment approach might be necessary to navigate lingering risks.
Advisers and investors are starting to recognise that private credit encompasses a range of strategies beyond corporate lending as they look to leverage its strong returns and diversification benefits, according to PIMCO.
