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Will smaller asset managers save you money?

By Staff Writer

Many boutique asset managers have considerably outperformed their larger institutional rivals and are now competing price wise on the same level, believes Windall Bekker, partner at Rezco Investment Consultants.  


Bekker says that although the term ‘boutique asset management’ historically invited expectations of exclusivity accompanied by higher fees, this is no longer the case. “Over the past decade, we’ve seen a number of boutique asset managers entering the fray and outperforming their larger institutional rivals at lower risk levels, while charging similar fees to institutions. The investment community is starting to take notice of boutique asset managers’ funds and their ability to generate outperformance, or alpha, for their clients, while at the same time being able to better protect clients assets in market downturns,” he claims.


Bekker also argues that boutique managers have a competitive advantage over large institutional rivals because of their size.  “Boutique asset managers are able to achieve these superior returns for a number of reasons. The size of boutiques gives them a considerable performance advantage over larger, more bureaucratic institutions, which take longer to buy into and sell out of a position. Investment decisions at boutique asset managers are grounded in high quality, independent, fundamental research.”


Size doesn’t matter

However Leon Campher, CEO of the Association for Savings and Investment South Africa, slammed the comments as irresponsible. “Rezco is a member of Asisa, it’s a good operator and has some good performance but I think the release in my opinion is irresponsible. It makes a bland statement that boutiques are better than the large asset managers and that’s a very wide ranging statement. I’m not sure [about this] as there is no evidence that this is the case.”


With regards to agility, Campher adds:  “A smaller fund managed by boutique or larger manager can be more nimble but nimble does not always equate to better performance. If you get it right and you are nimble you can get good performance; if you get it wrong you can get bad performance.”


Campher points out that choosing an asset manager is not a simple case of large vs. small. He said that instead, funds and their performance should be compared. “For the person looking at appointing an asset manager what you have to look at is: do they have a team, do they have some depth in that team, what is the turnover of that team, have they been around for a while and is there a performance track record on their funds that can be attributed to that team? Those are the kinds of questions you have to ask and should apply whether they [asset management firms] are large or boutique.”


Asisa’s tips on finding the right manager:


If you are looking for a fund manager to invest your hard earned cash with, Asisa has the following tips:

1.    Compare apples with apples. “Don’t look at the size rather look at the performance of the fund relative to other funds in its categories,” says Campher.
2.    Speak to your adviser. “They deal with fund management houses a lot. Ask them what they think of the team, their depth and track record. A one man band could always disappear,” advises Campher.
3.    Find out who invests in the fund. “If that fund manager has started his own business and has attracted a particular client it can be problematic if that client moves on,” says Peter Blohm, senior policy advisor of Asisa. Campher adds: “If a large client pulls out it can affect the standing and performance of the remaining money in that fund cause there is a big cost impact on the portfolio.”
4.    Check and compare performance. “At Asisa we don’t get involved but there are two major surveys in the mutual fund space that you can look at. It’s the Raging Bull Awards and the Morningstar awards,” explains Campher.
5.    Compare performance over a long period. “Don’t look at performance over just one year. Look at performance over three years plus and compare it with other funds,” says Campher. 

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