The Boutique Advantage
The Boutique Advantage – a new empirical study of the Australian boutique funds management industry
Active management has been receiving much press of late, somewhat negative and perpetuating a growing belief that active management cannot deliver on its investment promise.
It was not so many years ago that many viewed active management as the taking of modest over‐ and under‐weight positions at the security or sector level. As an investment approach, it is necessarily challenged by the interplay of fees, low levels of active risk and typical success in security selection all but guaranteeing underperformance after fees. Active management is a label that should be applied to strategies that deliberately allocate investors’ capital based on an investment approach rather than an index consideration.
The risk for active management is that the brand itself becomes inextricably associated with real or perceived poor investment experience.
Our proprietary study of the Australian funds management industry finds that investment teams within what we define as a ‘Boutique’ fund manager, have outperformed both their benchmarks and their Non‐Boutique (traditional, larger, well‐known) peers over time – net of fees. We have termed this trend: ‘The Boutique Advantage’1,4.
Augmenting the active vs. passive debate to include Boutique active investment managers can show the value that these active investment managers can add to investors’ portfolios.