Financial Standard | Monday, 8 November 2010

By John McDuling
The call of the boutique fund has proved irresistible for many investment professionals, but ratings can still be retained in the face of departures, according to a new study.

In its third quarterly Musical Chairs report, S&P fund services found that 94 per cent of departures of key investment professionals this year have been from mainstream investment managers.

More than a quarter of those that jumped ship left a mainstream house to join a boutique, while 31 per cent remain in transition or still haven't announced a new role.
S&P said the boutique phenomenon locally, which has seen the likes of Ascalon, nabInvest, Treasury Group and Challenger establish themselves as viable incubation businesses, providing institutional support for separately
branded, part employee owned boutiques, was consistent with global trends.

"The attraction of being in charge of your own destiny and achieving financial rewards through equity ownership in a boutique appears to be irresistible to a number of investment professionals," said S&P head of fund research, Leanne
Milton.

In the third quarter of 2010, 10 key staff departed from rated fund managers, affecting A$22.4 billion of funds under management (FUM), and 6 of these resulted in ratings actions, the report said.

With key man risk a hot topic in the boutique funds management community, S&P said that succession planning, depth of staff and early notification were the keys to retaining ratings after key departures, citing the departure of Ken
West from Perennial as an example of a departure that had been handled well.

Milton added that despite the increasing appeal of boutiques, mainstream institutions still had some advantages, including security and the ability to manage more substantial portfolios.

"The key for mainstream managers will be finding the right balance to ensure their vital intellectual capital is retained for the future."

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