Policy Papers

Delivering Value for Money: The Case for Boutique Asset Management

The active asset management industry has been under attack for a number of years from passive products, smart beta strategies, and latterly the press and the industry regulator. Although there has been a huge amount of coverage of the active versus passive debate, the tendency has been to group all active managers together, rather than to dig deeper and differentiate between types of active manager. In this paper we explore some of the risks of passive products and highlight some of the benefits of active management.

NCI members are specialist boutiques, with an owner-management ethos and strong alignment of interest with their clients. NCI believes these key traits provide structural advantages, particularly when compared to closet index trackers which charge high fees for index-like performance.

NCI recognises the attraction of passive products, which are another tool in the toolkit for investors. For some investors a purely passive approach, or a mixture of passive and active makes sense, but the majority of investors have the information and capacity to do better by selecting active managers.

This availability of information is key. Transparency is a core value of NCI. We believe value for money is in the eye of the beholder. By providing an investor with clarity about objectives and transparency of information, they are able to make an educated decision about whether a manager can add value to their portfolio. Large institutional investors have been able to obtain detailed information on the costs of running portfolios for years. Our message to all investors is to ask managers for detailed information on costs and charges. If the manager is unwilling to provide them, that probably tells you something.

The paper ends with what we hope are helpful conclusions to guide investors, and a call to the industry to consider working together to adopt technology to ease the investment process and reduce costs.

Jamie Carter

Chairman, New City Initiative Chief Executive, Oldfield Partners