The rise of the boutique funds management firm has been one of the success stories of the asset management industry in recent years and it is easy to see why.
The structure inspires dedication by having fund managers owning a slice of the business, and these managers don't have to deal with the distracting internal politics and competing interests found within large institutions.
Besides, fund managers who go it alone have the potential to share in a substantially larger share of the spoils of their own efforts than their salaried colleagues, which should provide additional stimulus.
The success of Kerr Neilson and his firm, Platinum Asset Management, has played an important role in promoting the boutique model among Australian fund managers.
But it is not all good news for ambitious portfolio managers who are considering making the transition to a boutique, as the legal stoush involving Integrity Investment Management has illustrated this week.
Working in a small group of highly ambitious fund managers is great as long as the relationships between the managers are good, but when relationships turn sour it can become messy.
The court documents concerning the fallout between Integrity portfolio manager Shawn Burns and managing director Paul Fiani display an unusual level of mud-throwing for this usually staunchly conservative sector of the economy.
The court documents show that many of the accusations made by the firm seem to be carefully selected against the terms of Burns' contract, and even if they were true, one could question whether the severity of the breaches outweighed the tenure of Burns with the investment team and his role in establishing the business.
Although it is hard to establish what really happened between Burns and Fiani, it seems the fallout has been largely caused by a favour Burns did for an old friend, namely endorsing his application for an Australian financial services licence.
It just happened to be a friend who was in the process of setting up a business that was planning to operate in the same Australian equity sector as Integrity.
The story gets a nasty twist from the fact that a month before Burns was asked to leave, the firm made changes to the conditions for a director to leave the business.
Although the court could not establish a relationship between these amendments and the departure of Burns from the firm, the fact is the changes made it less profitable for Burns to exit the firm now than if he had been fired a month earlier.
Whatever the outcome of the legal case, it seems unlikely any of the portfolio managers involved will come out of this stoush entirely unscathed. The mud-slinging rubs off poorly on anyone associated with the affair.
It is an outcome that a large institution or institutional backer may not have allowed to happen.
