The former head of operations at LibertyView Capital Management, a hedge fund owned by Lehman Brothers, has begun building a boutique asset management business in Australia.
David Lane, formerly senior vice president at LibertyView and now based in Sydney, aims to partner with boutique fund managers holding proven track records but were unable to build scale during the bull market to set up a “firm of boutiques”.
“Some [boutiques] have clearly done incredibly well. But there are a number that have just got stuck. The sad fact is that performance alone doesn’t get you assets,” Lane said.
Unlike the incubation model, Lane’s venture, which is backed by private equity capital, aims to invest in the businesses of established boutique managers and, at an agreed cost, provide operational and marketing support to help them secure institutional money.
“Incubation is difficult. You might wait three years, and for whatever reason they don’t have a good track record. Three years is kind of the magic number,” he said.
“There will be no contracts. This is ownership.”
The business would display some similarities to LibertyView, which supported a range of strategies that were “effectively run as fiefdoms” by portfolio managers, but would probably not feature hedge funds.
“Most of the problems in the last 18 months to two years were more from leverage and less liquid assets. Most of the businesses we look at will not have either of those.”
The size of the equity stakes his business negotiates with managers would depend on the scale of their businesses and aspirations for growth.
Lane already has the backing of private equity investors and is searching for suitable managers.
“Finding the right opportunities will be the challenging part – there is plenty of money to go into these investments.”
While these boutiques would ideally provide a range of strategies across different asset classes, so far the majority of managers Lane has spoken with ran equities.
He was not concerned that any significant increase in scale among the boutiques would constrain their ability to outperform.
“There’s a difference between going from $5 billion to $10 billion and from $50 million to $1 billion. There is plenty of growth in the groups that I’m talking to.
He said the managers were discreet players.
“These aren’t the types of companies you read about.”