Influential funds management researcher Stephen van Eyk has placed his weight behind smaller boutique fund managers, urging investors to consider boutique managers as opposed to larger more established groups.
Speaking at theFinancial Planning Association’s(FPA) April luncheon yesterday, van Eyk said the trend towards pre-mixed portfolios, the emergence of portfolio content over brands and the effects of interest rates and globalisation, all have made now the time to consider incorporating boutique managers into investment portfolios.
Van Eyk says one of the age old arguments against boutique fund 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 byvan Eyk Researchlast 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.
The research found that 100 per cent of the boutique managers achieved their stated objectives, while only 52 per cent of the larger brand names achieved their stated objectives.
Further, there was no evidence that boutique managers had higher portfolio turnover than larger fund managers. Rather, the boutique managers in the survey had portfolios with less stocks, greater stock conviction and higher tracking error as a result.
However, van Eyk says his favourable opinion of boutique managers did come with a warning.
“The most important thing is to ensure you have got quality people. Don’t just dump money into boutique fund managers,” van Eyk says.
Van Eyk says the quality of people was generally regarded as higher on average at boutique fund managers than larger fund managers.
