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Will 2013 star manager exits spark new boutique trend?

by Danielle Levy on Dec 09, 2013 at 09:47

Meanwhile, as large houses undertake negotiations with distributors ahead of new platform rules next year, Coombs expects big groups will be pressured to drop fees while boutiques with talented managers will be better placed to keep their fees higher.

He doubts that remuneration is likely to be a key motivation for an established manager to leave their company but rather a desire to maintain strong performance.

‘If you are worried about your reputation as your fund is getting bigger and you feel you have lost control, it is about your reputation for performance. You will want to retire with that intact if you are wealthy and less driven by financials,’ Coombs added.

Aberdeen co-head of multi-manager Aidan Kearney takes a different view. He does not expect to see a prolonged trend of manager departures to boutiques, arguing that if anything, the trend will be towards large companies as consolidation continues apace.

‘The big are getting bigger. In that environment, we have seen a slowdown in boutiques over the last year or so,’ he explained.

‘There is the issue of incremental compliance cost and distribution power. Boutiques will struggle unless they have a way to combat those things,’ he added.

Reacting to star manager departures

When a star manager departs, how should unitholders react? In Kearney's view, it is important to not follow the herd.

‘Do not act on others’ reactions. For one, your circumstances are likely to differ and any action you take should be relevant to you. That said, you must be aware of the impact of the reactions of others as this will affect fund flows. It is simply another factor to consider as part of the wider picture,’ he explained.

Andrew Wilson, head of investment at Towry, says it is important to look at things on a case-by-case basis: ‘We don’t have a hard and fast rule on it, but generally we move on as we have something lined up that we like. It is generally not really worth that risk if you have something lined up elsewhere, which we tend to do.’

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