Brian Dennehy, managing director of Dennehy Weller & Co, says the size of a fund management house is immaterial. “Our main concern is to choose funds with momentum, and therefore with a greater likelihood of outperforming in the immediate future,” he says.
While the RDR can benefit boutiques, it also puts pressure on fees, which means companies need larger funds to be profitable. Chris Sexton, investment director at adviser firm Saunderson House, says: “Investment fees are too high; this has made it possible to launch boutique funds easily. We use some boutiques – Somerset Capital, for example, which has a solid process. I don’t think it [the RDR] will kill boutiques, just any managers who aren’t differentiated.”
There are also increasing regulatory costs, particularly from European initiatives, which are creating higher fixed costs for asset managers.
The RDR does not yet seem to have benefited boutique fund managers, with any gains made largely as a result of increased buoyancy in equity markets, where boutiques can differentiate themselves. That said, following larger managers has in many cases been justified by performance.
Investors could reasonably be accused of performance-chasing, but not of a mindless adherence to certain brands.
Cherry Reynard is a freelance journalist
