The Boutique Advantage Not all active managers are created equal, and independent boutique managers with high conviction and differentiated strategies are distinct from massive institutions Given our business model at AMG—seeking to invest in and partner with best-in-class boutiques on a global basis—we wondered how boutiques would hold up under scrutiny, compared to active managers in general, both in all markets and specifically in those markets with increased volatility. To answer these questions, we ran two proprietary studies, both available at AMG.com, analyzing the performance of active boutiques across nearly 5,000 institutional equity strategies. Our analysis spanned a 20-year period and included 11 different equity categories of varying market capitalizations, styles, and geographies (see Methodology section below). Our analysis provides strong evidence that active boutique investment managers generated significant value relative to non-boutiques and passive investments. Why Is There A Boutique Advantage? Fundamental Characteristics that Position Boutiques to Generate Long-Term Outperformance: AMG’s business was founded nearly three decades ago on the principle that, given fundamental characteristics, independent boutique investment firms are best positioned to generate excess returns over the long term. Two decades of data strongly indicate that this is the time for investors to turn to independent active boutique managers. — Jay C. Horgen President and CEO | AMG The Boutique Advantage in All Markets Our analysis of a recent study provides strong evidence that active boutique investment managers generate significant value for clients, relative to both non-boutique managers and benchmarks. Past performance is no guarantee of future results. Investing involves risk. This should not be construed as a recommendation or investment advice. Data sources are believed to be reliable but there is no guarantee as to accuracy. Source: AMG proprietary analysis and classification of firms and strategies. Statistics shown are on an average annual basis for the 20-year period from 3/31/98 to 3/31/18 for 11 institutional equity categories examined. Firms represented include AMG Affiliates. MercerInsight® database utilized for return data. Elevated volatility periods are defined as those in which the CBOE Volatility Index® (VIX®) was greater than 20. For full methodology, please see The Boutique Premium: The Boutique Advantage in Generating Alpha and The Boutique Advantage in Volatile Environments, both available at AMG.com. The Boutique Advantage in Volatile Markets Our analysis demonstrates that active boutique investment managers continued to excel in turbulent markets, outpacing both non-boutique managers and benchmarks. Past performance is no guarantee of future results. Investing involves risk. This should not be construed as a recommendation or investment advice. Data sources are believed to be reliable but there is no guarantee as to accuracy. Source: AMG proprietary analysis and classification of firms and strategies. Statistics shown are on an average annual basis for the 20-year period from 3/31/98 to 3/31/18 for 11 institutional equity categories examined. Firms represented inclide AMG Ailiates. MercerInsight® database utilized for return data. Elevated volatility periods are defined as those in which the CBOE Volatility Index® (VIX®) was greater than 20. For full methodology, please see The Boutique Premium: The Boutique Advantage in Generating Alpha and The Boutique Advantage in Volatile Environments, both available at AMG.com. In the News Portfolio Manager Insight: “Today, fundamental analysis and security valuation matter more than ever, setting up selective actively managed strategies to navigate the significant risk factors in the market today and find mispriced investment opportunities.” — JASON SUBOTKY Partner and Portfolio Manager | Yacktman Asset Management Portfolio Manager Insight: “Boutiques are structured to allow our investment professionals to focus on what matters…and to take advantage of price swings, not be driven by them.” — SIMON HALLETT Co-Chief Investment Officer and Partner | Harding Loevner Media Coverage | 3/26/2020 CityWire Reprint: Are Your PMs Crash Tested? Probably Not. CityWire’s latest commentary on portfolio manager longevity since the last financial crisis. read more Download Now Get Instant Access to Our Latest Research The Boutique Advantage: Overlooked Performance WHITE PAPER The Boutique Advantage: Overlooked Performance The Boutique Advantage: Outperformance During Volatility WHITE PAPER The Boutique Advantage: Outperformance During Volatility Order Your Print Copies ORDER NOW Methodology About Our Study During Typical Markets Our analysis incorporated more than 1,300 individual investment management firms around the world. We classified investment managers as boutiques as long as they met four specific criteria: Significant principal ownership (with a minimum of 10%) Solely focused on investing Manage less than $100 billion in assets Not exclusively smart-beta or fund-of-funds On average, the assets under management of those we classified as boutiques were $6.4 billion versus $134 billion for non-boutiques. Setting the limit at $100 billion allowed us to cast a wider net, but 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.1 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 6,000 managers and 32,000 strategies. We analyzed 1-year rolling returns for the 20-year period ending March 31, 2018: 1-year returns gave us a much larger sample size than if we had used rolling 3-year, 5-year, or 10-year. Net returns2 were used when comparing the boutiques to the indices, to get a better sense of true value creation for clients relative to the index. Gross returns were used when comparing the boutiques to the non-boutiques, since the fee rate differential between the two groups was minimal. 1 Source: AMG proprietary analysis 2 Return comparisons with indices reflect deduction of estimated average fee rates based on available data for each product category. About Our Study During Volatile Markets Our analysis incorporated more than 1,300 individual investment management firms around the world. We classified investment managers as boutiques as long as they met four specific criteria: Significant principal ownership (with a minimum of 10%) Solely focused on investing Manage less than $100 billion in assets Not exclusively smart-beta or fund-of-funds On average, the assets under management of those we classified as boutiques were $6.4 billion versus $134 billion for non-boutiques. Setting the limit at $100 billion allowed us to cast a wider net, but 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.1 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 6,000 managers and 32,000 strategies. We analyzed 1-year rolling returns for the 20-year period ending March 31, 2018: 1-year returns gave us a much larger sample size than if we had used rolling 3-year, 5-year, or 10-year. Net returns2 were used when comparing the boutiques to the indices, to get a better sense of true value creation for clients relative to the index. Gross returns were used when comparing the boutiques to the non-boutiques, since the fee rate differential between the two groups was minimal. 1 Source: AMG proprietary analysis 2 Return comparisons with indices reflect deduction of estimated average fee rates based on available data for each product category. Important Information: This material has been prepared by Affiliated Managers Group, Inc. (“AMG”) and is provided for informational purposes only. This material is only directed at persons who may lawfully receive it, and you should satisfy yourself that you are lawfully permitted to receive this material. AMG is in the business of making investments in boutique investment management firms, and is not in the business of providing investment advice. This material 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 this material are those of AMG, are as of the date hereof 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 this material and shall have no liability for any decisions or actions based on this material. AMG does not undertake, and is under no obligation, to update or keep current the information or opinions contained in this material. The information and opinions contained in this material are derived from proprietary and non-proprietary 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, and 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 this material could have a material impact on the performance presented herein. No part of this material may be reproduced in any form, or referred to in any other publication, without our express written permission. 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CBOE makes no warranties or merchantability or fitness for a particular purpose. In no event shall CBOE be liable for direct, indirect or incidental, special or consequential damages from the information here regardless of whether such damages were foreseen or unforeseen. This document is distributed by AMG Funds LLC (“AMG Funds”), which 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. Index Definitions: The MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. With 1,125 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The MSCI World Index captures large and mid-cap representation across 23 Developed Markets (DM) countries. 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