Since the start of the financial crisis, boutique managers have seen their market share increase, according to data from fund-analytics group Lipper.
Since the start of the financial crisis, boutique managers have seen their market share increase, according to data from fund-analytics group Lipper.
Much of their inflows have come from institutional investors that are increasingly looking outside traditional investment options for superior returns.
In a recent report (Empowering boutiques: The rise of the specialist manager), State Street pointed to the advantage boutiques have of being able to distinguish themselves through their ability to generate alpha in fresh new ways.
However, boutique managers face various challenges and obstacles on the way to business success. These include the difficulty of setting up shop, the cost of operations, regulatory pressures and lack of IT infrastructure.
These were some of the top factors mentioned by respondents to the latest boutique asset manager survey conducted by Sungard, one of the world’s leading software and technology services companies. The survey, Asset Arena 360, examined the obstacles that stand in the way of these firms’ success.
Respondents also identified investor confidence, investment returns, rising costs, risk transparency and the Eurozone crisis as the top five factors that could destroy their business in 2013.
Adam Sussman, director of research, TABB Group, says: “Asset managers are faced with the challenge of trying to achieve scale and staying focused on their area of expertise. This has been particularly true as institutional investors continue to consider investments with specialized investment managers that can offer exposure to specific growth strategies.
“This has increasingly led to a two-tiered marketplace, with large multi-service asset managers controlling the lion’s share of activity, and the remainder going to niche players, including independent boutiques.”
But, smaller managers need to meet the same due diligence criteria as larger firms before they win a significant mandate, he noted.
In facing these challenges, nine of 10 survey respondents are looking to use technology to help their business meet growth challenges and satisfy increased demands.
However, while large players enjoy economies of scale, smaller asset managers are profitable on fewer assets than larger firms as they offer more unique products and can therefore charge higher fees, said 60% of respondents.
Some 70% of respondents believe that an “hourglass” or “big squeeze” phenomenon – in which middle market players are increasingly marginalized – will likely continue to re-shape the marketplace.
Sungard’s survey can be viewing in full by following this link.
