SunGard sees opportunity for boutique asset managers
03 December 2012
By Toby Garrod
With the onset of the financial crisis, many of the big financial institutions such as UBS, RBS and Japan’s Nomura have been forced to cut back on investment banking jobs and scale back on equities and advisory branches. Recent findings from a research survey from SunGard, however, indicate that many of these bankers and traders may soon find themselves working for or founding small asset management businesses.
“There’s clearly a very healthy space and opportunity for smaller fund managers to do what they do best which is to offer a more nimble operating framework and more unique products than their larger peers,” Paul Compton, head of product management, alternative investments, SunGard tells Asia Asset Management. “Investors seem to be very much buying into the idea that there is value to be had from smaller asset managers on the basis that they are offering a different product and in some ways are more innovative and better performing than their larger peers.”
Here are a few highlights of the research on trends in boutique fund management:
Hurdles to setting up new shops
The traditional ‘Two Traders and a Bloomberg Terminal’ model no longer sits well with investors who now expect new asset managers to have at least US$100 million in the coffers before making placements. Cost of operations (22%), regulation (20%) and institutionalisation – burden of due diligence and compliance (19%) are the top three stumbling blocks that prevent new asset managers from gaining critical mass.
Small can be beautiful
Most growth businesses are started in downturns and those that make it past the $100 million hurdle will find that they enjoy several advantages over the big beasts: 60% said smaller asset managers are profitable on fewer assets than larger firms as they offer more unique products and can therefore charge higher fees.
Being owner-managed is the single most important advantage for boutiques
Respondents say they enjoy the relative lack of bureaucracy and the ability to focus on generating alpha rather than attending corporate conference calls.
Smaller asset managers are profitable on fewer assets than larger firms as they offer more unique products and can therefore charge higher fees (60% said).
Boutique asset managers have more in common with similarly sized hedge funds and alternative funds than the largest asset managers (78% said).
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