The SunGard Asset Arena 360 Boutique Asset Manager survey recently examined the prospects for institutional boutique asset managers, the obstacles that lay ahead, as well as strategies for growth in an increasingly challenging cost-pressured industry.
"Asset managers are faced with the challenge of trying to achieve scale and staying focused on their area of expertise. This has been particularly true as institutional investors continue to consider investments with specialized investment managers that can offer exposure to specific growth strategies. This has increasingly led to a two-tiered marketplace, with large multi-service asset managers controlling the lion's share of activity, and the remainder going to niche players, including independent boutiques," said Adam Sussman, director of research, TABB Group. "But, smaller managers need to meet the same due diligence criteria as larger firms before they win a significant mandate."
Key survey findings include:
Being owner-operated ranks among the top drivers of success within the boutique fund industry, but nearly half of respondents (49%) attribute the rise in boutiques in part to a reaction against large funds.
Some 70% of the SunGard survey respondents believe that an "hourglass" or "Big Squeeze" phenomenon—in which middle-market players are increasingly marginalized—will likely continue to re-shape the marketplace.
Larger players enjoy economies of scale, while smaller asset managers are profitable on fewer assets than larger firms as they offer more unique products and can therefore charge higher fees, said 60% of respondents.
9 out of 10 respondents are looking to technology to help their business meet growth challenges and satisfy increased demands.
For those looking to set up shop, cost of operations, regulation, the burden of due diligence and compliance, the ability to show institutional grade control systems and IT investment are the top five barriers to entry.
Boutiques have a clear view of the factors that could make or break their enterprises in the next year, and have identified investor confidence, investment returns, rising costs, risk transparency and the Eurozone crisis as the top five factors on their watch lists.
"Owner-managers need real-time information at their fingertips concerning their clients, portfolios, trades in progress, risks and compliance issues, with a single point of truth and a full audit trail," said Paul Compton, SunGard's head of strategy for asset management. "To win new business and service 'continuous due diligence' demands, they need to be able to demonstrate the integrity of their processes to potential investors. And to be competitive they have to stay lean. That's the power of Asset Arena 360, a single integrated platform for all these functions, hosted and managed by SunGard to help keep the internal costs of owning and operating technology to a minimum."