In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led, multi-boutique global asset manager with over USD20 billion under management, recently undertook a survey with 204 UK investment professionals, seeking insights into their perceptions and attitudes towards boutique asset managers.
Nedgroup Investments commissioned Censuswide to probe professional investors including IFAs, wealth managers and fund selectors on their relationships with boutiques, and to help determine which asset classes investors preferred to use larger firms for, and those for which boutiques were the preferred option.
Tom Caddick, Managing Director, Nedgroup Investments says the survey was commissioned to help the firm develop an understanding of what clients are looking for, and thus tailor products to suit client needs.
“We understand that there is a need for both larger asset management firms, and boutiques. What was interesting for us was to find out where our clients were looking to use each type.”
Results were fairly evenly split across both fixed income and equity funds. Overall, across an average of the fixed income categories, 39 per cent of respondents said that they used a boutique manager only. 19 per cent used both, and 38 per cent said a large manager.
Within equity and multi-asset funds, boutique asset managers were the favoured vehicle for those investing in US (44 per cent), European (41 per cent) and Asia ex-Japan equity funds (43 per cent), as well as Japanese equity funds (44 per cent). Boutique asset managers also prevailed when it came to multi-asset (45 per cent) and property (44 per cent).
Caddick believes this is indicative of market dynamics. “Client needs are shifting due to the increasing uncertainty. Investors are looking for managers that can find alpha opportunities within this flux and many clients are incorporating boutiques and larger houses into portfolios. We have seen demand for specialist boutiques increasing as their expertise and nimble structure allow an investment approach that larger managers cannot match,” he says.
For example, Caddick noted the survey revealed a preference for specialised expertise in fixed-income investments. “This aligns perfectly with the launch of our Global Strategic Bond Fund, which is managed by Palomar Fixed Income, our first in-house boutique.”
When investors were asked what they considered the strongest characteristics of a boutique firm to be, the most prevalent answers were the firm’s focus on a small range and stability of the investment team (both 30 per cent), their lean and cost-effective nature (29 per cent), and that they were ‘investment-led’ (27 per cent). A quarter of all those surveyed (25 per cent) also noted that their investment systems and operations are tailored to their primary skill set; referred to their ‘independence’ and the experience of the investment team.
Risks associated with boutiques were3: ownership and structure (37 per cent), risk management (33 per cent), profitability (32 per cent) and infrastructure (30 per cent).
“Particularly pleasing for us as an investment-led business, was that very close behind was that people consider boutique firms to be ‘investment-led’ (27 per cent), as well as offering a ‘lean and cost-effective’ service (29 per cent).”
The most important characteristics for investors when partnering with a boutique asset manager were client service (27 per cent), thought leadership (24 per cent), lower fees (22 per cent), and alignment of client interests (19 per cent). Nearly one-fifth (18 per cent) of investors cited both specialist investment expertise and boutiques’ investment-led nature.
Caddick concluded: “It’s clear that investors appreciate the characteristics of boutiques that we also believe make them special. While we understand the perceived risks associated with a boutique, a tried and trusted multi-platform model such as ours can help allay some of those notions, notably the ownership and structure and infrastructure elements.”
