Boutiques wield independence, specialisation over larger managers: Research

New research shows that boutique fund managers count their independence, specialist strategies and ability to align interests with clients as their main competitive advantage and what helps them earn the "boutique premium" over bigger players.

The survey of 87 boutiques from the UK and Europe, conducted by the University of London's Bayes Business School in the paper The case for boutiques, highlighted several advantages they have over larger asset managers in a concentrated market.

Citing IPE data, the world's largest 500 asset managers oversaw US$120 trillion in 2024. BlackRock and Vanguard managed US$22 trillion between them.

Some 40% of boutiques believe that asset class specialisation is one of their core competitive strengths, while 30% said their focus on a small number of strategies is core to their offering.

Nearly a third said their independence is a key advantage of their business with an additional 49% believed it to be a significant driver of competitive advantage.

The paper builds on 2015 research from Affiliated Managers Group (AMG), which calculated a boutique performance premium.

That study found the outperformance of US boutiques over other asset managers during a 20-year period was as high as 127bps annually for emerging markets equity funds and 113bps annually for global equity funds. For US small caps, it was between 31bps and 101bps.

Bayes Business School professor Andrew Clare's 2022 research also found funds managed by boutiques outperformed those provided by large asset managers.

"0.52% p.a. and 0.23% p.a. on a gross and net basis respectively when we use a version of the Fama and French (2015) five-factor model and by 0.82% p.a. and 0.56% p.a. on a gross and net-of-fee basis respectively when we use an index model," he said.

Commenting on the latest findings, global network the Group of Boutique Asset Managers (GBAM) chair Tim Warrington said: "This is now the second academic, peer-reviewed study in recent years confirming what many investors already know: boutiques can deliver a premium over their larger counterparts. But despite the growing body of evidence, boutiques often remain underrepresented on platforms and are too often overlooked by consultants."

Warrington pointed out that the results are not isolated to the UK.

"The boutique premium exists in global markets too, and clients globally are recognising the benefits of backing focused, specialist managers. Our challenge now is to make sure the ecosystem - from consultants to platforms - keeps pace with the evidence," he said.

"In a world of shrinking alpha and increased industry consolidation, we're urging gatekeepers to rethink how they value specialist, performance-led managers."