Boutique asset managers provide a variety of benefits to consider when a financial adviser wants to diversify large manager exposure in a client’s portfolio.
The following list provides more detail on why Amplify believes that Boutique managers are better equipped to provide Alpha.
Size – A diminishing opportunity set exists with larger size.
Boutiques were traditionally classified as such if they had a small AUM. We don’t necessarily believe in this classification as there is much more to just the size argument, it’s also about how the business is set up. What we do agree with is that with a larger size your opportunity set decreases. Not just from an SA equity point of view, but also from an alternative toolkit point of view.
Independence – Majority of the business is owned by staff with skin in the game
We believe true independence is when a boutique is not part of a bank, a financial services company and not listed. Furthermore, true independence comes with majority owned by staff with skin in the game. Their only focus is to provide outstanding investment performance for their clients.
Transformation – Diverse views generate a better outcome for clients
Amplify truly believes in the power of transformation and our managers share the importance of it. Study show that a diverse boardroom leads to better outcomes and the investment world is no different.
Strong background – Highly experienced team with a proven track record
Most boutique managers broke away from the larger institutions where they cut their teeth. ie Matrix was founded in 2006, they have 28 Investment professionals with more than 300 years experience. Similarly, Terebinth was founded in 2013, they have 12 investment professionals with over a 100 years of combined experience
Quick decision-making – Robust and swift process with less complexities
In an ever-changing environment asset managers need to be able to act swiftly if they want to actively generate alpha or protect clients’ investments. With less red tape and hierarchy, Boutiques are able to act quickly when circumstances change.
Truly active and agile – The door is always open for opportunity
Boutiques are not only active from an asset allocation point of view, but also active in looking for opportunities that might not be accessible to larger manager. We call it the “Hedge Fund Mentality” where nothing is left on the table.
What is the “Hedge Fund Mentality”
Providing a sustainable competitive advantage
- Asymmetrical returns
The willingness to give up some upside to protect the downside to provide positively skewed returns.
- Risk management
A much larger toolkit that leads to higher risk diversification.
- Focus on absolute returns
There is no need to take on excessive risk.
- Special Opportunities
Our managers don’t just sit and wait, they go where the opportunity is.
Runs on the board are more important than fours and sixes. Compounding returns is your friend.
What to do when you are wrong? Our managers don’t fall in love with a share, they will sell if they are wrong.