The trend of big-name managers jumping ship to join either a small
investment house or to start their own firms is is now firmly established
in the UK.
The phenomenon of boutiques began in the US about 10 years ago and
boutiques now springing up in the UK.
In the last couple of years, Japan specialist Ed Merner left Schroder to
join Atlantis, William Pattison left Fleming for LionTrust, Scottish Widows
fund manager Albert Morillo joined BlackRock and former Perpetual fund
manager Scott McGlashan is setting up his own Far East ern boutique.
Poor pension fund performance in recent years by some of the traditional
big names, such as PDFM and Schroder, has given new smaller play ers the
opportunity to capture mandates.
The big houses had the balanced pension market all sewn up a few years ago
but a period of sustained underperformance has seen a change in trustees'
perception and they have turned to specialist players.
Some of the smaller houses are already making an impact.
In January, league tables from the Combined Actuarial Performance Service
showed smaller investment companies outpaced the bigger players in the
pooled pension market last year.
The star was Orbitex Investments' £1m exempt balanced fund which soared by
154 per cent. It comfortably beat second-placed Fuji-Lord Abb ett's fund
which returned 75.8 per cent.
Boutique Bonfield Asset Management was set up in 1997. It has $100m under
management split between two funds investing in Central Europe and Japan.
It is planning to launch a Japan Oeic fund in the summer to be managed by
ex-Schroder fund manager James Salter.
It is also planning a Japan hedge fund and is looking to recruit fund
management teams to extend its Japanese and European capabilities.
Head of global marketing Paul Boughton, who joined Bonfield from Schroder
last month, uses the word “nimble” to describe the way boutiques operate
and why many people are keen to move away from the big houses.
He says: “We will aim to keep our funds relatively small because we want
to provide a unique offering and performance. We do not want to be me-too.”
Bonfield, like many boutiques, is not looking for a retail presence and
has no inten tion of becoming a Jupiter or a Newton. It will target the top
end of the market and discretionary players such as the Lazards and the
Hendersons. It does not have “hot money” going in and out all the time and
wants to build up a high-quality client base.
Boughton says: “A bout ique business is very much a performance-driven
busi ness and we are the owners of the business so we have an added
incentive to produce the performance.”
He believes boutiques can add value to the customer by giving them a more
personal service than they would get from a big house. He and the fund
managers often ring clients to keep them up to date on the fund.
Boughton says: “Last week, James made an important call on a particular
high-profile stock. We called clients to explain why he had made that call.
But we can only make such calls when we are legally able to do so.”
Fund managers who have made their name are moving to the smaller start-ups
because they want to manage money – and that is all.
In the world of the big organisation, office protocol, internal politics
and red tape can often interfere and this is driving managers away. Many
are getting frustrated and they want flexibility.
Matrix Money Management product development director Bridget Cleverly
says: “Consolidation in the industry has meant that companies are getting
so big that managers are losing their freedom. Managers in big
organisations are spending more time on onerous tasks such as client
servicing and internal meetings when they want to concentrate on managing
The fund management industry is set to divide into the big players and the
small niche players and those caught in the middle could well suffer.
Boughton says: “It is difficult to be unique in the mid-range. The smaller
players have no choice but to deliver performance if they want to survive
and by doing that they will get a high-quality client base.”