Category: Policy Papers

ABSTRACT

In  this paper we explore a segment of the asset management industry that has received relatively little attention, that is populated by independent boutique, or specialist asset managers. We conduct a survey of these managers to try and determine: the structure of this industry; information about the competitive advantage that boutiques believe that they have over larger fund houses; and information about the impediments that they face.

Key findings:

1. Boutiques see the following factors as being particularly key to their competitive advantage:

a. their independence;

b. their focus on a small number of strategies;

c. alignment of their interests with those of their clients;

d. their agility / adaptability

2. Boutiques have particular concerns about: distribution; the ability to achieve a critical mass for larger allocations; and promotion by consultants all featured prominently.

3. More mature boutiques see succession as a significant issue for their businesses.

4. Respondents argued that performance-related fees helped them align their success with that of their clients, but that investment platforms were often not willing to accommodate such fee structures.

Executive Summary
Objectives
This research explores the importance of leadership in driving job satisfaction, staff retention and staff output within the UK’s boutique asset management sector. It also analyses how leadership manifests itself in practice, how different stakeholders view leadership, and how
this influences their approach to leadership and its development. Finally, this report consolidates these findings to establish 11 practical steps which boutiques can take to enhance leadership capabilities within their organisations.
Purpose
Understanding how leadership is approached across boutiques may provide insight into the reasons for which boutiques generally perform better than their non-boutique peers, why certain boutiques succeed and some fail amongst their boutique peer-group and how boutiques can enhance their leadership capabilities to increase their results and longevity. It is understood that no such academic research has been conducted on the UK’s boutique asset management prior to the publication of this research.

Independent Investment Management Initiative – Response to FCA Consultation Paper CP 24/2 – ‘Our Enforcement Guide and publicising enforcement investigations–a new approach’
IIMI welcomes the opportunity to respond to the FCA’s Consultation Paper CP 24/2, Part 2. However, we do not believe that the FCA has demonstrated a sufficient need to introduce these proposals. The case for change has not been sufficiently made. Alternative approaches, which would be less harmful to smaller businesses and better align with the FCA’s competition objectives, have not been sufficiently explored before advancing these proposals.
As a representative body for small boutique investment managers, we recognise the importance of maintaining market integrity and ensuring investor protection. However, we have significant concerns about the proportionality of the proposed measures, particularly regarding the principle of “innocent until proven guilty” and the cost implications for smaller firms.

Dear Rachel Reeves and Tulip Siddiq, 12th December 2024

As a group of over 50 entrepreneurial specialist investment managers, predominately based in the UK, we share your vision to deliver the long-term, sustainable and inclusive growth of the financial services sector in the UK. We strongly believe that small businesses, including specialist investment firms are the engines of growth. Our membership represents over $500bn in client money and around 3000 members of staff and we work closely with the regulators, the government and the City of London supporting you with your mission to promote a competitive and world leading asset management center with client outcomes at its core.

Dear Lord Forsyth, Committee Members, 28th November 2024

As a group of over 50 specialist investment managers, predominately based in the UK, we welcome the focus of this inquiry. Led by consultation with our members, we have several constructive ideas which could help embed the objective of international competitiveness and growth. Particularly as smaller and independent managers, we fear that progress towards this objective has thus far been limited. We are hopeful that the findings of this enquiry can help address this.
We strongly believe that small businesses, including small and specialist investment firms, are engines of growth. However, there are significant costs and complexities of starting an asset management business in the UK. We are often compared with our US counterparts who have much lower barriers to entry and hence entrepreneurial businesses can be born with greater ease. Enabling the development and scaling of small businesses should be part of the scope of the FCA’s secondary objective. Regulatory costs disproportionately impact smaller
firms, given their resource and capital constraints. These raise barriers to entry and discourage entrepreneurs (unless they have access to significant pools of capital, which has implications for diversity as well as growth and innovation in our industry). It also reduces investment choice and feeds the ever-growing challenge of consolidation in our industry. We therefore welcome moves towards regulatory rationalisation, as well as harmonisation with international standards. This must, of course, be done in ways compatible with the FCA’s objectives regarding consumer protection and market integrity. We see many ways in which they can be mutually reenforcing.

It has now been over one year since The Consumer Duty came into force. We have responded to the FCA’s Call for Input on the Duty, in conjunction with our members, with a view to supporting the regulator to identify challenges that smaller asset managers have had with embedding the Duty and evolving this important piece of regulation for the benefit of retail customers.

Following her appointment as chancellor, IIMI has written to Rachel Reeves to share some ideas for regulatory reforms with a view to promoting a competitive and inclusive UK asset management industry. This letter was written in consultation with our membership and has been shared widely within the industry.