Schroders’ recent bid of £424m for Cazenove Capital shows the value of a successful boutique.
Cazenove Capital is one of the many smaller groups for whom the ‘boutique’ values of non-benchmarking, manager autonomy and freedom worked to deliver strong performance. But, with some of the larger boutiques increasingly being snapped up, who are the next generation of boutique managers?
John Husselbee, chief executive of North Investment Partners, believes that the market is opening up for the next wave of boutique managers to emerge: “The Cazenove/Schroders deal suggests that the long-talked-about consolidation in fund management is finally starting to happen. The pressure imposed by the RDR is likely to bring about a consolidation into larger groups, which will in turn, create room for newer boutiques.”
However, these new boutiques will have to differentiate themselves in style and approach. He highlights Twentyfour Asset Management, a fixed income specialist founded in 2008. It now has £1.7bn under management and has launched a range of funds that aim to offer investors alternative options in fixed income. The Monument Bond fund, for example, was launched in 2009 and invests in a portfolio of UK, European and Australian residential mortgage-backed securities.
The majority of the more recent boutique launches have been focused on equities, but with the same theme of differentiation. One group that is currently attracting interest among investors is Miton. The group has been through several incarnations, but seems to have found its feet with the recruitment of Gervais Williams in March 2011. He has found traction for his Diverse Income investment trust, now almost £100m in size from a standing start in 2011.
Gary Potter, co-head of multi-manager at F&C Investments, has also been looking at the group’s recently launched Miton US Opportunities fund. He knew managers Nick Ford and Hugh Grieves in previous roles and is reassured by their track records at Gartmore and Société Générale Asset Management.
He points out that most people starting boutiques have a measurable track record. Crispin Odey, for example, had a long track record at Barings before setting up on his own: “As a result, I don’t believe that start-up boutiques are necessarily more risky. If you have confidence in the people behind it, there is no reason it should be more risky.”
Mr Potter highlights a number of other boutiques that the group has backed in its Thames River Global Boutiques fund, including Heronbridge, Intrinsic Value Investors (IVI) and Ardevora. Heronbridge is a value-focused investment group, taking a private equity-type approach.
Mr Potter says: “We would suggest that the investment quality in boutiques is often ahead of that in mainstream groups – they must have confidence in their ability to set up on their own. They tend to have an absolute return mindset – i.e. making money without reference to a benchmark – and they tend to be capacity controlled, focused on protecting what they have got. Fund managers also don’t tend to leave boutiques as often.”
