The boutique premium

Boutique investment managers have consistently outperformed over the past two decades, delivering significant value when compared to primary indices, a study by the Affiliated Managers Group (AMG) claims.

Based on the results from the study, the average boutique outperformed the average non-boutique in 9 of 11 equity product categories, by an average annual 51 basis points. On this basis, investing exclusively with boutiques across all categories would have created 11 per cent greater wealth for clients over the last twenty years.

Additionally, the average boutique strategy outpaced its primary index in 9 of 11 equity product categories, by an average annual 141 basis points after fees. Top-decile and top quartile boutique strategies added 1,133 basis points and 589 basis points, respectively, on an average annual basis after fees as compared to their primary indices.

The analysis incorporated data from more than 1,200 investment management firms and nearly 5,000 institutional equity strategies comprising approximately $7 trillion in assets under management. The study analysed rolling one-year returns for the trailing 20-year period ending December 31, 2014, across 11 broad institutional equity product categories, on a strategy-by-strategy basis.

The study estimated boutique net excess returns as compared to indices – incorporating boutiques’ available published or “rack” fee rates in the MercerInsight® database – in order to assess net value creation for investors.

AMG is a global asset management company with equity investments in boutique investment management firms. AMG says its partnership approach allows each affiliate’s management team to own significant equity in their firm while maintaining operational autonomy.

In addition, AMG provides centralised assistance to its affiliates in strategic matters, marketing, distribution, product development and operations.

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