A series of fund manager moves over recent months and the market flotation of John Duffield’s New Star have drawn the attention of IFAs to the boutique sector.What does the term really mean and are IFAs convinced of the merits of boutiques or would they still prefer to put their clients’ money somewhere with a longer history and more funds under management? Boutiques are not necessarily small operations. Jupiter, for example, ranks 11th in total funds under management with its unit trust business having total funds under management of 8.7bn but the firm feels that “boutique” is more a question of culture than assets under management. Jupiter head of retail communications Alicia Wyllie says: “We believe that the term boutique is increasingly about a style of management, not size. It identifies a group that has high performance cultures, giving managers the freedom to invest using their own individual style rather than being shackled by a house view and who often have equity stakes in the businesses they work for.” Liontrust marketing director Jonathan Harbottle says the freedom to invest as managers want is the essence of boutique management. Liontrust manager Jeremy Lang worked at James Capel in the 1980s and had to pursue a value process but came to Liontrust with the understanding that he would be able to follow his own approach. Harbottle draws another distinction between smaller and bigger boutiques in the ways they market themselves. Harbottle says: “We are clearly at the other end of the spectrum from the likes of New Star and Jupiter in the way that we market our products. It is not to say one approach is right, the other is wrong but we want to be in a position where an IFA can say to their client they have a business they probably haven’t heard of.” Rensburg mid-250 manager Leigh Himsworth has a different view, describing the marketing of traditional fund managers as beneficial to all in the sector. Schroders’ Andy Brough has 1.16bn under management in his mid-250 fund compared with Himsworth’s 28m. Himsworth says: “Our chief competitors in the mid-250 space are Schroders’ Andy Brough and Old Mutual’s Ashton Bradbury. Andy Brough is a charismatic manager who talks up the sector and that helps our fund sales.” Boutiques also market themselves on recruiting and retaining fund managers. Hargreaves Lansdown boss Peter Hargreaves says Artemis, New Star and Jupiter have continued to be successful in recruiting the fund managers from bigger, older firms. He says this has the effect of “regenerating the industry”. Hargreaves adds: “One fund manager described his experience at a big firm to me as feeling like a factory worker. It is easy to see how the likes of Artemis, New Star and Jupiter have been able to attract the best managers in this situation.” But recent moves in the sector suggest that boutique managers are less capable of holding on to talent than they used to be. The departure of Jupiter European manager Leon Howard-Spink to Schroders in July preceded the departure of four managers from Scottish Value Managers in the autumn and since the New Star float, analysts have started asking how long managers will stay after their equity tie-ins run out. Hargreaves says: “Where some boutiques are concerned, the average investor is better off sticking with the traditional fund management firms such as Fidelity and Invesco Perpetual until a research house like ours has blessed a move. There can be some nasty surprises for investors without access to all the information.” For some advisers, the boutique/traditional question is not an issue. Antrams IFA Phillip Mines says his first priority is asset allocation and cost and, beyond those, his choice of fund manager is unimportant. Mines says: “If I had decided that the client needed 25 per cent in UK equities, I would then be looking for the cheapest funds in that range. I would rather pay less than 1 per cent for a tracker fund than pay the additional charges that come with active management. It makes no difference to my clients who is running the money.” Bestinvest business development manager Justin Modray says: “It really is down to the manager and, as ever , there is no hard and fast rule as to which is better. In theory, boutiques should offer better performance as the managers take a stake in the business and have their interests aligned but there are some excellent managers on both sides of the fence.” As an example, Modray rates Fidelity’s 5.4bn special situations fund highly, a demonstration of “a humungous fund run very successfully by a humungous group”, but says Majedie’s 100m UK opportunities fund has also delivered spectacular performance, returning 23 per cent last year.