FUND BOUTIQUES & PRIVATE LABEL FUNDS: Independence, Entrepreneurship, “High-Conviction Approach” & Outperformance (Michael Bohn, Greiff Research Institut GmbH)

There is still no uniform definition for the term “fund boutique”, but from our point of view, all fund boutiques have one thing in common, i.e. a kind of trademark: they are owner-managed and their strategies are unique in contrast to the “big players” in the fund industry. Usually, the change of a (well-known) fund manager into self-employment is the birth of such a fund boutique. In Germany, there are very successful houses and these independent asset managers are also coming more and more into focus in the media. Names that have been strong in this country for years, both in the private client business and with institutional and semi-institutional investors, and continue to grow, include Acatis, DJE, Flossbach von Storch, and Lupus alpha, to name just a few.

What makes a fund boutique, how does it differ from the big fund houses? First of all, it is a fact that the large providers often launch funds on a scattergun principle to cover as many themes as possible and to reach the largest possible number of investors. Fund boutiques, on the other hand, take a completely different approach, because there are “actively managed strategies away from the mainstream” and not infrequently certain niches are occupied. While fund managers in large houses must adhere to certain guidelines within their strategy, fund boutiques and their managers have a great deal of leeway and can ultimately give free rein to their creativity. One of the other strategies of a fund boutique would not even exist without the customers, because besides, the fulfillment of individual investor wishes also plays a certain role. This in turn means that successful or special investment solutions are often not showered with money, which is an advantage in the case of one strategy or another.

Michael Bohn ist Geschäftsführer der Greiff Research Institut GmbH und leitet zudem das Redaktionsteam der Publikation „Der Fonds Analyst".
Michael Bohn is Managing Director of Greiff Research Institut GmbH and also heads the editorial team of the publication “Der Fonds Analyst

The “high-conviction approach” (concentrated portfolios) is widespread among fund boutiques: The managers do not follow any index, structure correspondingly concentrated portfolios with comparatively few securities and, as a result, the funds very often have only a low correlation to mainstream funds, which benefits the investor portfolio.

No less important for the success of a fund boutique and therefore not to be underestimated are, in our view, the following arguments in addition to this described flexibility and existing niche occupation: The personal connection and the proximity to the investors are in each case a valuable commodity, which the large market participants can hardly or not at all offer. This, in combination with a certain continuity of personnel, builds trust with investors that can tip the scales in favor of a boutique approach. We all know that in the end, it is mostly performance that counts, but boutiques can score points here as well: As a study by London’s Cass Business School in collaboration with the Group of Boutique Asset Managers showed, fund boutiques managed to outperform large asset managers (various equity funds, period January 2000 to July 2019). In some areas, the outperformance was particularly striking (for example, large caps, mid and small caps Europe). But of course, there are stumbling blocks that small boutiques often encounter.

The path to the first ten million euros can sometimes be very long, which can of course be due to the skill of the manager or the lack of contacts with investors who are open to funding boutiques. Arguments such as “fund volume too small” or “insufficient history” does not make life any easier for aspiring fund boutiques. Longer phases of standstill can be the result before the breakthrough is eventually achieved. But also in the future, there will always be boutiques that leave the market again.

Conclusion: In our view, fund boutiques can score with their independence, maximum commitment, personal ties, and specialization with investors. And studies have already proven that this can go hand in hand with outperformance compared to the big managers.

Michael Bohn is Managing Director of Greiff Research Institut GmbH, heads the “Fund Analysis Research” division, and has over 20 years of investment experience, including in the evaluation of investment funds. He also heads the editorial team of the publication “Der Fonds Analyst“.



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