New hope for boutiques

A stagnant investment environment has stifled the oxygen of start-up capital and inflows for new investment businesses over the past year, particularly those wanting to stand without an institutional backer.

But researchers agree the continuing trend of consolidation among the industry’s bigger players may be the precursor to new boutique managers opening their doors.

Standard & Poor’s head of fund research, Leanne Milton (pictured), and Morningstar co-head of fund research, Tim Murphy, agreed that the ones to watch over the coming six months will be the managers affected by UBS’s acquisition of ING Investment Management, one of the biggest independent investment managers in Australia, with the deal expected to close in the fourth quarter.

Meanwhile, Perpetual’s star stock picker and the man responsible for the group’s $6.1 billion Concentrated Equity Fund, John Sevior, made waves late last month when he indicated he may not return to his post at the helm of Perpetual’s Australian equities capabilities.

Perpetual shares took a dive as speculators considered whether Sevior would follow in the footsteps of Peter Morgan and Anton Tagliaferro in setting up his own shop, taking substantial numbers of investors with him. The hit on Perpetual’s share price once again highlighted the need for institutions to continue to create boutique structures within a bigger brand.

“Some of the more mainstream managers have made significant progress in replicating some of the characteristics of the boutiques both in terms of creating the right alignment and incentives to retain their key stock pickers,” Milton said.

It’s a strategy groups such as Challenger have embraced, with great success. Challenger’s boutique stable is expected to hit $15 billion in funds under management in this year’s end of financial year results on the back of recent additions, including Alphinity Investment Management.

Of the new groups to open doors over the past year, including Avoca Investment Management, established by former UBS portfolio managers John Campbell and Jeremy Bendeich, additional financial and administrational support from a bigger player is a must.

But even those boutiques without an institutional partner are relying heavily on the big end of town for mandates, with most advisers and retail investors preferring to sit on the sidelines for now.