Boutiques outperform by “wide margin”

Profits upActive boutique investment managers have consistently outperformed both their non-boutique peers and their benchmarks over the past 20 years, according to research.

The Boutique Premium, a study by asset management company Affiliated Managers Group (AMG) that evaluated the performance of boutique investment management firms, found in many cases boutique firms were outperforming others by “a wide margin”.

AMG, which invests in an affiliate network of firms which are themselves boutiques, says that the average boutique outperformed the average non-boutique in nine of 11 equity product categories over the past 20 years by an average annual 51 basis points.

Investing exclusively with boutiques across all categories over this period would have created 11% greater wealth for clients, compared to investing with non-boutiques.

The study also found the average boutique strategy outstripped its primary index in nine of 11 equity product categories, by an average annual 141 basis points after fees.

In addition, top-decile and top-quartile boutique strategies added returns of 1,133 basis points and 589 basis points, respectively, on an average annual basis after fees.

“Top-performing boutiques added 55 basis points more value than poorly performing boutiques detracted on an annual basis, illustrating that these strong returns were not simply a function of higher risk,” said Andrew Dyson, AMG’s head of global distribution.

The research included data from over 1,200 investment management firms and nearly 5,000 institutional equity strategies comprising around $7 trillion (€6.2 trillion) in assets under management (AUM).

Boutiques were defined as firms solely focused on investment management, in which principals were required to hold at least 10% equity ownership and which had assets under management of less than $100 billion. Exclusively smart beta or fund-of-funds platforms were not included.

AMG affiliate equity boutiques held an aggregate of $638 billion in AUM at March 31, 2015.

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