STORE
in News
AustralianSuper wins Super Fund of the Year
- published on 22/05/2013
- 0
The winners of the inaugural Chant West | Conexus Financial Super Fund Awards were announced last night in a ceremony at Ivy Ballroom ... [more]
Multi-boutique model shows signs of stress
- 4 June, 2012
- 0
print
A very recent example is Lodestar Capital. This boutique Australian equities business, which is 33-per-cent-owned by nabInvest, announced in early April that it will be closing its doors on June 30 after five years of managing money.
Boutiques debunked In recent months there have been signs of a consolidation phase beginning within the multi-boutique sector. In October last year Wilson HTM Investment Group (WIG) announced “it was commencing a process to explore the introduction of a strategic partner for Pinnacle Investment Management to assist growth in the business”.
However, by late March WIG stated that “of the indicative offers received for acquisition of some or all of the WIG’s 79.3-per-cent equity interest in Pinnacle, the board has concluded that none are currently sufficiently attractive to pursue”.
So what, if anything, is wrong with the multi-boutique model and what lessons are there for prospective new boutiques looking for a backer and the multi-boutique operators themselves?
The multi-boutique model was never expected to be immune from a general industry downturn. The difficulties some are now facing can be partially attributed to industry factors that are affecting the investment-management community as a whole. Investor confidence in active management and growth assets generally has yet to fully recover from the hit taken during the global financial crisis of 2007 and 2008.
To date, the majority of boutiques in Australia have been specialists offering active long-only equities or absolute-return strategies. These strategies have been among the hardest hit by the downturn in investor confidence.
There are, however, other factors at play more specific to the multi- boutique sector itself. Poor manager selection is the most common failing. In the race to expand the ranks, some providers have sacrificed quality for the number of managers they have partnered with. Simply being a boutique is no longer a sufficient point of difference to grow a business.
Another familiar mistake is the failure by multi-boutique providers to implement a scalable operating model capable of translating funds- under-management growth into real bottom-line-profit growth. The most common error made by multi- boutique operators in this regard is having insufficient depth and quality of resources to support a growing and more complex boutique stable.
In other words, an operating model that works for three long-only Australian boutiques each with funds of $2 billion won’t necessarily work as more diverse and larger boutiques are added to the ranks.
A further weakness in the sector has been a failure to sufficiently diversify the business away from a reliance on boutiques offering domestic-asset classes to domestic investors only. Nab Invest and Ascalon have been standouts in terms of their willingness to address these issues through their investments in offshore managers.
© Copyright: Whole articles from this website and newsletter cannot be reproduced without permission from the editor.
If you wish to publish introductions to any article please ensure that it links to original content site www.investmentmagazine.com.au, and that it shows clear attribution to Investment Magazine, plus author name and date.
Failure to abide by this request will be considered a breach of copyright and legal action will be taken.
Vote
Do you prefer the term non-affiliated or non-associated to independent board member?
We thought you might also be interested in these stories ›
- Filter:
-
Investing
How institutional investors manage money
-
Fiduciary Duty
The work of investment committee chairs at superannuation funds
-
Sales & Marketing
Selling investment strategies
-
Custody & Admin
Servicing institutional investor assets and customers
-
Regulation
Public policy and superannuation
-
Wrap
Institutional investment news
-
Special Reports
Sponsored articles focusing on institutional investment
in Research
Online service most highly rated
- published on 20/05/2013
- 0
HESTA was the top-scoring fund in a survey of member-satisfaction levels carried out by CoreData Consulting, which has highlighted the need for more tailored ... [more]
in Strategy
Product important at Sunsuper
- published on 20/05/2013
- 0
Sunsuper has boosted its product division, appointing three senior managers in newly created roles. The division, created last year to centralise the super ... [more]
in Regulation
ASIC strategy: targeted surveillance
- published on 20/05/2013
- 0
The Australian Securities and Investments Commission (ASIC) will be taking a targeted surveillance approach to how superannuation funds undertake intra-fund advice, with particular ... [more]
Retirement: a cause worth working on
- published on 20/05/2013
- 0
There are two things that drive the newly appointed global chief operating officer of State Street Global Advisors, Greg Ehret, in his bid ... [more]
in Regulation
Opposition to delay SG rise
- published on 20/05/2013
- 1
The Coalition has said it will delay the increase of the super guarantee from 9 per cent to 12 per cent if it ... [more]