Research reveals 'boutique premium' within European asset management
'Important part of the industry'
European boutique asset managers have been found to outperform their larger rivals by as much as 0.56% per annum on average, a study has revealed.
Research from Cass Business School Asset Management shows there to be a 'boutique premium' in the European fund management industry of 0.56% and 0.23% net of fees, depending on which methodology is used.
The outperformance was particularly pronounced within the European small- and mid-cap and global emerging markets fund sectors, with a net-of-fees boutique premium of 1% and 0.5% respectively.
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Professor Andrew Clare, who undertook the research, which is thought to be the first of its kind, said the results "provide enough evidence to warrant further analysis of this important part of the asset management industry".
"Future research should focus on the factors behind the existence of the boutique premium, such as the ownership structure of boutique managers and/or their approach to portfolio construction," Professor Clare said.
Tim Warrington, chairman of the Group of Boutique Asset Managers (GBAM), who Clare consulted with to identify boutique firms, said the results were unsurprising as boutiques were "smaller, highly motivated, specialist firms which seek to consistently outperform while aligning their interests with that of their clients".
Warrington continued: "Given the compounding of this premium over time could produce significant additional returns to investors, far more needs to be done by advisers and fund platforms to expose these benefits to long-term investors."
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The boutique premium was first coined by AMG Group in 2015 when it reviewed the performance of US boutiques versus US non-boutique asset managers.
Professor Clare's research looked at 120 large fund groups and identified 780 long-only funds across all equity sectors, tracking their performance between January 2000 and July 2019.
It compared those results with boutiques as defined by GBAM and three investment consultancies that advise institutional pension schemes and insurance companies.
The methodologies used were the Fama/French five factor, and an index model to risk-adjust returns collected from Morningstar.
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