The creation of new investment-management boutiques continues around the world, despite a relatively tough time for active fund managers during the past 12 to 18 months.
The head of equities and acting chief investment officer for MLC, Jonathan Armitage, says the company’s fund-of-funds approach to creating products for the Australian market means it regularly receives approaches from start-ups and boutiques looking for support.
He says the “traditional areas” of funds management – including Edinburgh and San Francisco – continue to be where new management talent is emerging.
He says that the global financial crisis has been characterised by a concentration of assets in the hands of institutions, but in many cases these institutions have failed to deliver the kind of performance that investors expected.
This in turn has prompted investment professionals employed by institutions to rethink how they go about doing what they do. This thinking often leads to the creation of a new boutique business.
“Talented investors will always want to find the purest way to practice their art,” Armitage says.
“And, if they can get paid commensurately, they will try that avenue.
“There’s no shortage of new businesses starting up, certainly outside Australia. In Australia, I think it’s become a bit more challenging. I think part of that is just because of the size of the market.
“In terms of global equities, we’re seeing a number of very attractive-looking boutiques start up.”
Ecosystems and ancillary services
Armitage says there’s no single place where boutiques are emerging.
“[It’s] all over the shop,” he says.
“In terms of those where we have given a small amount of money, mostly seed investment so we can keep an eye on the investors, there’s one in Edinburgh, one in Connecticut, we have one in San Francisco. They’re in traditional asset management areas – we haven’t found someone in Vladivostok.
“But that entrepreneurial culture seems alive and well. One of the drivers of that is you’ve seen a concentration of assets in some of the big asset managers globally, and some of those returns just have not been as good as you’d have hoped. That always spurs on people to set up their own business.
Armitage says the founders of boutiques “tend to be people who have come from a very strong direct asset-management background”.
“They tend to have pretty good pedigrees,” he says. “Some of them may have been able to persuade one or two clients to come with them.
“And in certain markets – particularly the US and the UK – there’s an ‘ecosystem’, where you can set up your own business and you have this support, whether it’s technical, processing, trading, back-office, being handled and a number of very successful umbrella groups that have been behind some very successful boutiques and will provide all these ancillary services.
“So, you let your very talented investors get on and do what they should be doing, which is investing.”