Get in early on boutiques

James McSkimming

You need to get in early if you want to maximise the benefits of boutique fund managers, according to new research released by Russell Investments.

The research report found that there were a number of important criteria to selecting and managing a boutique manager, but investing in the right boutiques early in their lifecycle added the most value.

The report found that median excess returns for boutique managers had been impressive during the first one to three years of operation and both behavioural and business-related factors tended to determine how a boutique manager evolved and performed.

Russell research analyst James McSkimming told a Melbourne round-table that, over the years, the company had watched a significant number of managers progress through the various stages of the lifecycle and that those boutiques that retained their original investment focus were more likely to continue generating solid investment returns.

He said the number of boutique investment managers in the Australian equity market had grown rapidly over the past two decades and that this had been a blessing for investors because it significantly increased the opportunity set of managers.

“However, it also increases the burden of selecting good managers from a larger list of candidates,” McSkimming said.