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(May-2002) Redesign works wonders for Commonwealth
Funds management researcher Stephen van Eyk has placed his weight behind smaller boutique fund managers, urging investors to consider these in favour of larger, more established groups.
Van Eyk says the trend towards pre-mixed portfolios, the emergence of portfolio content over brands and the effects of interest rates and globalisation, have all made now the time to consider incorporating boutique managers into investment portfolios.
He says one of the age-old arguments against boutique managers is the issue of size, and that boutiques do not have the funds under management or the economies of scale to deliver the performance attributed to larger fund managers.
But he says there are a lot of other facts that are masking the fact that size does matter, one of which is investment style.
In research conducted by van Eyk Research last year, boutique fund managers were found to have a slight leaning towards a style-neutral approach, so they were seen as more opportunistic than larger fund managers that often used indexed investments.
Van Eyk also found that 100 per cent of the boutique managers achieved their stated objectives, while only 52 per cent of the larger brand names achieved theirs.
There is no evidence boutique managers have a higher portfolio turnover than larger fund managers. Rather, the boutiques in the survey had portfolios with less stocks, greater stock conviction and higher tracking error as a result.
However, van Eyk’s favourable view of boutiques is accompanied by a warning.
“The most important thing is to ensure you have got quality people. Don’t just dump money into boutique fund managers,” he says.
Van Eyk adds that the quality of people is generally regarded as better on average at boutiques than larger managers.
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