Advisers are ditching star fund managers and big name fund houses and increasingly turning towards boutique firms to meet their client needs, says new research from ratings and research firm FE.
Brand was listed as a low priority when picking an outsourced investment solution the Evolution and Experimentation: The Financial Advice Market in 2016 report found.
Advisers that responded to a question regarding three new funds they invested in over the last year listed 222 funds across a “staggering” 82 different fund houses, the report says.
“Advisers are not awestruck by big reputations,” it said, adding that advisers are “dropping star managers and are abandoning major fund houses when they believe they no longer meet their clients’ needs”.
More than half of the top 20 funds that are being increasingly researched via FE’s Market Intel tool were boutiques, while the bottom 15 were all big-name brands, according to analysis of more than 10,000 users.
Mika-John Southworth, director at FE, says: “There’s a lot of commentary in the industry about 80 per cent of assets going into 20 per cent of funds.
“What this shows is that while there’s a lot of cash being put into big funds it doesn’t mean there’s not an appetite for differentiated businesses or funds.”
A report released earlier this year by PwC found star manager culture was dying out as firm’s focused on creating team-based processes to mitigate potential business risks from a high profile departure.
Multi-asset firm City Asset Management “gravitates towards smaller, more boutique fund managers”, says research director James Calder, even though that was not an explicit part of its investment process.
“The larger fund buyers are probably precluded from buying those funds at an early stage without swamping them. Our size allows us to buy that type of fund manager,” Calder says.
However, he says there is “nothing wrong with investing in star fund managers”.
“When you talk about star managers you’re not talking about mavericks, you’re talking about people with a very definable, reputable investment process. The only reason they raise so many assets is that their investment process works.”
Southworth says: “There’s security in what people know, but there’s also a continual pressure on advisers to be able to deliver something that is unique.”