Staff ownership of funds management firms was concentrated among boutiques, but not confined to them, said George Walker, the chief executive of US-based Neuberger Berman, talking about the differences for a large manager in being staff or institutionally owned. Australian super funds have had a love affair with boutique managers since the mid-1990s, after MLC, a bellwether multi-manager, backed the nascent Portfolio Partners spin-off from County Australia. Since then, boutiques have mushroomed, especially Aussie equities boutiques. Australia had been described, by former Russell Investments chief Alan Schoeinheimer, and others, as ‘the land of boutiques’. Russell, Mercer and Intech (now Ibbotson Associates) have published studies to show that boutiques, indeed, outperformed for various reasons and up to a point. Capacity was certainly a big limitation and early investors enjoyed more rewards than the later ones.

More recently, following a 10-year period of lacklustre or even negative returns from their international portfolios, super funds had been looking to emulate the alpha-generating success of their local boutiques with their global counterparts. So, could global boutique managers, with their much-larger universe of investment opportunities, also take advantage of their size (small) and autonomy (no bureaucracy) and employee-owned (no share price concerns) status compared with large institutionally owned firms? Neuberger Berman, a 71-year-old New York-based manager, perhaps represented a good case study. Neuberger was independent until 2003 when it sold to Lehman Brothers. After Lehman’s troubles during the financial crisis, the executives organised a management buyout in 2008.

Neuberger, which managed about US$180 billion across various asset classes and strategies, was now one of the largest majority-employee-owned funds managers in the world. So, what’s the difference? According to George Walker, Neuberger’s chief executive, the firm as it stood now benefitted greatly from the Lehman ownership period, when geographical and product/strategy expansion was the order of the day. But, with employee ownership, things were different. “We spent a lot of time stitching the teams together and building our business strategies,” Walker said. Lehman also bought a couple of other smaller firms to add to its in-house management capability. The Asian arm was especially boosted during this period, with the Hong Kong office expanding to over 20 staff and an additional 10 investment professionals in a China office, in Shanghai. Walker said this expansion was client-driven, as many American and European pension funds looked to increase their Asian exposures both before and during the financial crisis.

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