The hunt for alpha among global investors is creating opportunities for boutique investment managers, but there is still a “tug of war” between capturing returns and avoiding risk, according to a 2012 State Street survey of more than 160 asset managers.
The State Street Vision Paper, released this week, says that institutional investors are not meeting their funding needs from traditional asset classes and are turning to boutiques, alternative assets and “fast-growing niches” as a result.
“With their deep specialist knowledge, boutiques are positioned to thrive in a marketplace with strong demand for differentiated sources of alpha,” the report says.
But while the search for yield was an important factor driving institutional investors – and was cited by 30 per cent of respondents – 39 per cent said that risk aversion was the main driver as institutions sought to diversity and protect capital.
Data matters
Boutique managers recognised the opportunity, but were aware that their information technology (IT) and operational infrastructure needed improvement, and this was driving a new wave of back-office outsourcing.
Only 29 per cent of respondents rated their existing operational and IT structures as “strong” or “very strong”, and one in five lacked confidence that this infrastructure would allow them to achieve their firm’s strategic goals.
“They need the tools to service those investments, whether its analytics or another kind of technology service,” said Andrew Willis, State Street’s head of business development for investment-manager services in a telephone interview.
“Size doesn’t matter so much, but they will still have to have those solutions and its not just technology. It’s around data as well, because if you don’t have clean data, that will be a disadvantage, because data is a large part of this.”
Twenty-six per cent of the respondents were based in the Asia Pacific, with 34 per cent in North America and 21 per cent in Europe. The survey was conducted for State Street by the Economist Intelligence Unit.
