Although the word boutique arouses feelings of exclusivity accompanied by exorbitant fees, this is no longer the case. In the last decade there has been a large number of boutique asset managers entering the fray and justifiably so. Boutique asset managers have been able to considerably out perform their larger institutional rivals for a number of years now.
As a result of this the investment community is starting to take notice of boutique asset manager funds and their ability to positively contribute to their clients’ investments.
One such development is the addition of boutique asset manager funds in a so called “core and satellite investment approach”. Independent Financial Advisors (IFAs) and multi-managers alike are starting to incorporate alpha generating “satellite” boutique asset manager funds into their portfolios to complement traditional “core” institutional management company funds. The result is a positive contribution to the overall performance of the portfolio and in some cases complimented by lowering of the overall risk of the portfolio.
A good case in point would be the constituent funds that make up the top 10 performing Domestic Asset Allocation Flexible category over the last year. All 10 of these funds are boutique asset manager funds who collectively have produced an average return of 33.8%. The Rezco Value Trend Fund falls into this category and has obtained a return of 36.1% over the corresponding time period. (Source: FundsData as at 22 August 2012)
Similarly, of the top 10 performing funds in the Domestic Asset Allocation Prudential Variable Equity category over the last year, 7 are boutique asset manager funds with the Rezco Prudential Fund being the top performing fund with a return of 27.41%. (Source: FundsData as at 22 Aug. 12)
How are boutiques able to achieve these superior returns?
The size of boutiques gives them a considerable performance advantage over the larger more bureaucratic, cumbersome institutions which take longer to buy into and sell out of a position. This often results in the institution missing the window of opportunity to react to changing market environments.
Boutiques have the interests of their managers aligned with those of their clients.
Management often have a considerable amount of their own money invested in the funds and therefore have a vested interest in the success of the funds.
A disciplined, focused investment process is executed resulting in a high conviction buy or sell programme. This often enables the fund manager to be contrarian and independent, resulting in above average returns
Investment decisions at boutiques are grounded in high quality, independent, fundamental research which enables the boutique to differentiate itself from the herd through the originality of their perspective.
Rezco Asset management is a boutique asset manager which has managed to incorporate the above advantages successfully into our funds. While obtaining outstanding performance is important, it is also fundamental to our investment approach that our clients’ capital be preserved.
In this unprecedented time of flux in the asset management industry, investors are increasingly looking to boutique managers that are more flexible and faster implementers due to their smaller asset pools and quick decision making. As you search for investment managers who have the potential to deliver strong results, be sure to consider boutiques.