ASSOCIATION COLUMN: Boutiques vs behemoths

The Group of Boutique Asset Mangers (GBAM) was established in Valladolid, Spain, recently to work together to improve their presence in their respective marketplaces.

By sharing information and promoting their presence both individually and collectively to potential investors, we felt we could make a difference to our businesses over the longer term.

The announcement of the establishment of the GBAM reignited the age-old debate of “boutiques versus behemoths”, and the relative merits of the small specialist managers compared with the giant asset management houses, which dominate the investment world.

This domination has been highlighted by Lipper, which recently said that the top five asset management groups in Europe had a market share of 19% of total assets under management – a number which goes up to 51% if we take into account the top 25.  In terms of sales, the top five saw 55% of total sales and the top 15 saw 85%.

The formation of the group and the debate was also particularly timely as news of a survey from the Washington-based Corporate Executive Board (CEB) suggests that rich Europeans are acting more aggressively to protect their wealth in the aftermath of the Cypriot banking debacle and were becoming more discriminating about the financial advice they received.

CEB anticipated a “flight to quality as the wealthy scrutinize their providers more closely, gravitating to those who can demonstrate real strength and stability.”

Such news is particularly relevant because it goes to the heart of the generally close relationship between the specialist asset manager and their ultimate clients and it provides further opportunities for boutiques to take advantage of an emerging trend.

The suggestion of a “flight to quality” plays well with the boutiques, which at Valladolid quickly came to debate the relative merits of boutique asset managers in the context of the work they undertake with their clients.

In the debate we saw ourselves, first and foremost, as specialist asset management businesses – quality operations with successful models, based on a limited range of products.

We also agreed that the close relationship with clients was not just hype or an overreaction to the competition with larger managers. Indeed, one manager from a major European city said it was not unusual for him to bump into his investors in the street when he popped out for lunch.

“I know them very well and have regular discussions with them. I can’t hide when things get a little difficult,” he said.

The delegates agreed that generally we had relatively flat organisational structures, often small compared with giant managers, yet “small”, “entrepreneurial”, “flexible” and “responsive” to changing market conditions – attributes which were highly prized by many of our wealthy clients.

Unsurprisingly, given the close relationship with our clients, we all tended to focus on manufacturing of investment products rather than producing them for mass distribution.

By debating the attributes of boutique asset managers we quickly began to define the attributes of a GBAM member – attributes which will provide us with opportunities in the current market place and continue to drive the success of boutique managers in the coming years.

José ­Luis Jimenez is the chairman of the Group of Boutique Asset Managers

©2013 funds europe



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