Challenger’s multi-boutique funds management business, Fidante Partners, has conducted an analysis of the boutique funds management sector in Australia.
The study, shared exclusively with InvestorDaily and titled The Boutique Advantage, aims to replicate a similar study that multi-boutique firm AMG conducted in the US titled The Boutique Premium.
The Fidante study used Zenith Investment Partners data and excluded LICs, multi-managers and index funds.
For the purposes of the study, ’boutiques’ were defined as funds management business that are at least 20 per cent owned by the investment team.
The study found that boutique Australian equity investment managers outperformed their benchmarks by 2.7 per cent over the past 10 years, net of fees.
Most notably, Australian equity boutiques were found to have outperformed their non-boutique peers by 1.3 per cent.
Discussing the results of the study with InvestorDaily, Fidante general manager Nick Hamilton said boutiques have become a good proxy for “genuine active management” in recent years.
The study found boutiques took approximately 23 per cent more active risk compared with non-boutiques over the past seven years.
While Mr Hamilton acknowledged it is possible for non-boutiques to deliver genuine active management, for the most part factors such as career risk have led to a reduction in their ‘active share’.
“Over the course of a number of years … a large part of the [non-boutique] active management has become less active,” Mr Hamilton said.
The reduction in ‘active share’ among larger Australian equity managers has been one of the main drivers behind the development of the hedge fund industry, he said.
“Now what you’re seeing is the active community starting to bifurcate. That money which was never generally active is moving to where it probably should be – smart beta or passive,” Mr Hamilton said.
“But we’re not seeing a lack of growth in our business, because the market does realise that there is active skill, and there is a good chance of getting rewarded for active skill.
“The study does appear to be saying that multi-boutiques are a proxy for genuine active management.”
