As “boutique” UK funds come out top in short-term performance, financial advisers say they prefer smaller houses for their nimbleness and tailor-made approach.
In the UK All Companies sector, three of the top-five performing funds in the past year came from houses with less than £7bn of assets under management. Neptune UK Midcap tops the charts based on one year performance data, rising 32.51 per cent in the 12 months to March 19, according to FE Analytics.
The £4.2m Premier ConBrio Sanford DeLand UK Buffetology fund came in third, returning 32.19 per cent while the £650m high conviction CF Lindsell Train UK equity fund came in fourth, and also ranked third best across a five year period.
Kim Barrett, managing director of Barretts Financial Solutions uses boutique fund houses for almost all his clients. He says that in his experience, larger fund houses could not offer the same level of returns because they had to be more generalist due to the demands of their clients.
“They are like a supertanker out at sea – they take a few miles to change course, whereas smaller funds are more nimble,” he says. Although the adviser adds that he has experienced a raft of soft-closures to new investment among boutique houses, which he speculates could be due to funds hitting saturation point.
Gervais Williams is managing director of Miton Group, which has £1.8bn in assets under management. As a passionate advocate of the smaller investment house structure, he agrees with Mr Barrett that smaller vehicles are able to tailor more exactly to their clients’ needs.
“The market is very much dominated by big brands but in spite of this, there is a strong ecosystem of niche opportunities that deliver more closely to their client’s goal,” he says.
Mr Williams suggests this strength will become more apparent as the credit boom fades, because the flexibility of the boutique structure allows it to invest in small-cap or AIM-listed companies that are seeing the returns investors are hunting for in a low-yield environment.
“Decisions can be so much quicker. There’s not a huge infrastructure and we can get into areas that larger houses struggle with,” he says.
In the long term, boutiques do not perform quite as well, with only four contributing to the top 10 UK All Company funds in five years, which is instead dominated by household names such as Royal London Asset Management and F&C.
Standard Life again comes out on top, with Ed Legget’s £576.5m UK Equity Unconstrained fund returning 33.65 per cent in that timeframe.
Neil Steedman, head of UK discretionary at Aberdeen Asset Management, suggests that big investment houses have the advantage because they have the resources to put people on the ground in the countries that they cover.
“We are very proud of having 30 offices in 24 countries. Being based in the markets we invest in is very important,” he says.
