A survey conducted in the UK of some 80 wealth and multimanagers has found that 95% expect to increase allocation to boutiques in the coming 12-18 months.
A far lower figure, 23%, expect to increase the allocation to passive funds, according to the survey that was carried out between September and October by distributor Harrington Cooper.
Boutiques scored favourably because of their perceived ability to adapt quickly to changes in the market, with the investors surveyed also pointing to a closer alignment of the managers’ interests with their own. The majority, 79%, suggested that smaller funds are better able to delivery alpha, and that they can offer a more active approach.
Equally, a majority of 82% of those surveyed suggested that brand was not an important factor when selecting a fund, and just 18% saw it as important for a manager to be considered a “star”.
The importance of active share is also highlighted in the survey results, with 92% saying they see this as important. Boutiques remain more popular than passive investments among the professional fund selectors surveyed, with 60% holding a relatively low proportion of 1%-10% of their assets in passive funds, compared to 94% investing up to half their total fund assets in boutiques.
Harry Dickinson, managing partner at Harrington Cooper, said: “Fund managers are under increasing pressure to deliver value for their fees and people do not want to pay money to invest in closet-tracking behemoths.”
“Time and time again we find that the best talent is found within boutique fund houses, from high conviction managers displaying high active share. These funds tend not only to provide stronger returns over time for investors but critically, help to diversify portfolios away from index returns, protecting against turbulent market conditions. The funds we distribute have seen large inflows in recent years and we expect this to continue, especially as professional investors increasingly look beyond the brand.”
“It is both heartening and significant to see that professional fund investors, be they wealth managers, multimanagers or multi-asset managers, are highly discerning when it comes to investing their clients’ money. They have built teams of experienced and objective fund analysts whose focus is on identifying investment talent that stands up to their scrutiny. They are not attracted by default to big brands and marketing budgets, but see the value in specialist boutiques and smaller funds.”