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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 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

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

Media Coverage | 4/16/2020

Institutional Investor: The Managers That Do Well During Volatile Times

 
Independent, partner-owned firms outperform, especially when times are tough, a new study shows.
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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

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

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.
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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.
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