Over 41% of wealth managers and multi managers expect to increase their asset allocation to boutiques over the next 12 to 18 months, fund distribution company Harrington Cooper has revealed.
According to a survey from the firm, 95% of wealth managers and multi managers in the UK are attracted to boutique investing as they believe that smaller funds are much more nimble and able to adapt quickly to changes in the market.
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The survey, conducted amongst 80 wealth managers and multi managers in the UK, said only 23% of wealth managers expect to increase the percentage of their assets in passive funds.
Passive funds are not as popular as boutiques also among professional fund selectors with the majority (60%) only holding between 1-10% of their total assets in passive funds. On the other hand, 94% invest up to half of their total fund assets in boutiques.
The survey also suggested that smaller funds allocated to boutiques are far better placed to deliver alpha (79% agree) and that such funds also offer a more active investment approach (74% agree).
Interestingly, the study revealed that 82% of wealth managers and multi managers did not view brand recognition of the fund house among their client base as an important factor when selecting a fund house. Furthermore, only 18% of those surveyed view a manager being star rated as important.
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By GlobalDataHarry Dickinson, managing partner at Harrington Cooper said: "Fund managers are under increasing pressure to deliver value for their fees and people do not want to pay money to invest in closet-tracking behemoths."
The increased interest in boutiques comes as managers look for new sources of alpha and to protect against challenging economic conditions by diversifying their portfolios. As a result, 92%, of wealth managers and multi managers look for funds with a high Active Share, the percentage of the portfolio that differs from its benchmark index, when selecting funds.
Dickinson added: "Time and time again we find that the best talent is found within boutique fund houses, from high conviction managers displaying high Active Share. These funds tend not only to provide stronger returns over time for investors but critically, help to diversify portfolios away from index returns, protecting against turbulent market conditions."
Research from Cremers and Petasjisto also shows that funds with the highest Active Share significantly outperform their benchmarks, both before and after expenses and with significantly less volatility.
