The Boutique Advantage Amid Volatility

Kevin T. Cooper, CFA


When the Going Gets Tough

Staying invested despite short-term market swings requires emotional fortitude. And while that’s easier said than done, positioning your portfolio to weather ups and downs can help. The essential ingredient? Managers who excel despite challenging market conditions.

Reliable Reinforcements

Managers who shine when markets turn sour can help investors avoid the pitfalls of emotional investing. But consistent standouts can be hard to find. AMG research has shown boutique managers outperforming both non-boutiques and indices in typical markets. Now we know they sustain that edge in times of turbulence, too.

Consider the results of AMG’s latest proprietary study, which examined the performance of active boutique managers during periods of heightened market turmoil. Building on the earlier research, our analysis covered a 20-year period and spanned nearly 5,000 institutional equity strategies across a range of market-capitalizations, styles, and geographies. (See About Our Study below.)

The results? If elevated volatility represents the ultimate test of an active manager’s mettle, boutique managers pass with flying colors.

Boutiques Outperformed in All Markets and Even Better in Choppy Markets

Average Independent Boutique Excess Return (2000-2019)


Source: AMG proprietary analysis. Firms represented include AMG Affiliates. MercerInsight® database utilized for return data. Primary indices include MSCI World, MSCI Emerging Markets, Russell 1000® Value, Russell 1000®  Growth, Russell 1000® , Russell Midcap®  Value, Russell Midcap®  Growth, Russell Midcap® , Russell 2000®  Value, Russell 2000®  Growth, and Russell 2000®. Average VIX®  values calculated by AMG utilizing CBOE historical data.

We found that boutiques significantly outperformed both indices and non-boutiques when volatility surfaced. Over the past 20 years, the average boutique outstripped its primary benchmark across all market environments, even when factoring in fees. Yet in times of market turmoil, the boutique advantage became even more pronounced—at 241 basis points (bps)1, nearly double the added value.

A similar pattern played out when we compared boutique managers to their non-boutique peers. While boutiques routinely surpassed their non-boutique counterparts, they shined even brighter when volatility spiked, delivering 116 bps of excess returns.

Where did boutiques have the biggest impact? Across categories, the magnitude and frequency of outperformance in less efficient markets was notable. Small-cap, emerging market, and global equity strategies exhibited the strongest relative performance during years of elevated market volatility.

How the Tough Get Going

Boutiques’ resilience appears compelling. But what drives it? Active boutique managers share several key traits that may prove beneficial when volatility surfaces, including:
  • Principals with significant direct equity ownership, ensuring alignment of interests with clients
  • Presence of a multi-generational management team, fully engaged across the business
  • Entrepreneurial culture with partnership orientation, which attracts talented investors
  • Investment-centric organizational alignment, including careful management of capacity
  • Principals committed to building an enduring franchise, embedding an appropriately long-term orientation
  • Operational autonomy and investment independence

While these traits seem to lend boutiques a natural advantage, they’re especially valuable in periods marked by greater downside risk. In challenging conditions, they better position boutiques to leverage buying opportunities and mitigate market losses.

Reacting emotionally to market turbulence often proves counterproductive. But many investors need reassurance to resist their natural tendencies. Boutique active managers can help strengthen investors’ resolve—fortifying them in unsettled times to stay the course and stick to their long-term goals.

About our Study

The assets under management (AUM) threshold for boutiques was set at $100 billion, which allowed us to cast a wider net. We also tested our analysis using $75 billion and $50 billion as an asset threshold. The differences were minimal, with a very small number of funds no longer qualifying.*

To gauge performance in turbulent markets, we used the CBOE Volatility Index®  (NYSE: VIX® ) as a proxy for market volatility, looking at the annual average daily spot rates over a 20-year historical period. Years of “high volatility” were defined as years during which the annual average VIX was above the 20-year average levels; years where the index was below the historical average are referred to as periods of “lower volatility.”

Some additional points on our methodology:

  • We used data from the MercerInsight® global database—which enables comprehensive analysis of institutional track records on more than 5,000 managers and 25,000 strategies.
  • We analyzed 1-year rolling returns for the 20-year period ending December 31, 2019: 1-year returns gave us a much larger sample size than if we had used rolling 3-year, 5-year, or 10-year.
  • Gross returns were used when comparing the boutiques to the non-boutiques, since the fee rate differential between the two groups was minimal.


For more information about our study or our definition of boutiques, please click here.

*Source: AMG proprietary analysis
1Basis point is equal to .01%

The study referenced in this article was prepared by Affiliated Managers Group, Inc. (“AMG”) and is provided for informational purposes only. AMG is in the business of making investments in boutique investment management firms, and is not in the business of providing investment advice. The study is not intended to be relied upon as a forecast or research and is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy, nor is it investment advice.

The views and opinions expressed in the study are those of AMG, and are subject to change based on market and other conditions and factors. AMG makes no representation or warranty as to the accuracy of the data, forward-looking statements or other information in the study, and shall have no liability for any decisions or actions based on the study. AMG does not undertake, and is under no obligation, to update, or keep current the information or opinions contained in the study. The information and opinions contained in the study are derived from proprietary and nonproprietary sources considered by AMG to be reliable but may not necessarily be all-inclusive and are not guaranteed as to accuracy.

Past performance is not a reliable indicator of future performance. In addition, forecasts, projections, or other forward-looking statements, or information, whether by AMG or third parties, are similarly not guarantees of future performance, are inherently uncertain, are based on assumptions at the time of the statement that are difficult to predict, and involve a number of risks and uncertainties. Actual outcomes and results may differ materially from what is expressed in those statements. Any changes to assumptions that have been made in preparing the study could have a material impact on the performance.

To read the full study, including related disclosures, please click here

MercerInsight® provides information about investment managers and their products together with analytical functionality and is not intended to constitute advice, a recommendation, or an offer to buy or sell a specific fund or investment. Through MercerInsight®, Mercer is not acting and has no intention of acting as a broker, dealer, or other intermediary in connection with the purchase or sale of any fund, investment, or other financial instrument. The information is not intended as a specific recommendation of any particular investment manager.

The MSCI World Index is a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries. It covers approximately 85% of the free float-adjusted market-capitalization in each country. Please go to for most current list of countries represented by the index.

The MSCI Emerging Markets Index is a free float-adjusted market-capitalization index that is designed to measure equity market performance of emerging markets. Please go to for most current list of countries represented by the index.

Neither MSCI, any of its affiliates, nor any other person involved in or related to compiling, computing, or creating the information in the study makes any express or implied warranties or representations with respect to such information or the results to be obtained thereof, and MSCI, its affiliates, and each such other person hereby expressly disclaim all warranties with respect to this information. MSCI® is a registered trademark of MSCI, Inc.

The Russell 1000® Value Index is a market-capitalization weighted index that measures the performance of those Russell 1000® companies with lower price-to-book ratios and lower expected growth values.

The Russell 1000® Growth Index is a market-capitalization weighted index that measures the performance of those Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values.

The Russell 1000® Index measures the performance of approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® represents approximately 92% of the U.S. market.

The Russell Midcap® Value Index measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000® Value Index.

The Russell Midcap® Growth Index measures the performance of those Russell Midcap companies with higher price/book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000® Growth Index.

The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market-capitalization of the Russell 1000 Index.

The Russell 2000® Value Index is an unmanaged, market-value weighted, value-oriented index comprised of small stocks that have relatively low price-to-book ratios and lower forecasted growth values.

The Russell 2000® Growth Index measures the performance of the Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.

The Russell 2000® Index is composed of the 2000 smallest stocks in the Russell 3000® Index and is widely regarded in the industry as the premier measure of small-cap stock performance.

Russell Investment Group is not responsible for the formatting or configuration of material or for any inaccuracy in the study.  Russell® is a trademark of the Russell Investment Group.

The CBOE Volatility Index, known as the VIX, is a popular measure of the stock market’s expectation of volatility implied by S&P 500 index options, calculated and published by the Chicago Board Options Exchange (CBOE).

CBOE cannot guarantee the accuracy, adequacy, or completeness of the information and is not responsible for any errors or omissions or for results obtained from use of such information used in the study.

The indices are unmanaged, are not available for investment, and do not incur expenses.

AMG Funds LLC (“AMG Funds”) is the U.S. retail distribution arm of AMG. AMG Funds is registered as an investment adviser with the Securities and Exchange Commission and as a Commodity Pool Operator with the Commodities Futures Trading Commission, and is a member of the National Futures Association.


Kevin T. Cooper, CFA


PUBLISHED: May 26th, 2020
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