Bounie forecasts rise of ‘multi-boutique model’

Bounie forecasts rise of ‘multi-boutique model’

The structure of the UK and European fund industry remains 20 to 25 years behind that of the US but could soon see new business models emerge, according to Vincent Bounie at Fenchurch Advisory Partners.

PricewaterhouseCoopers UK asset management leader Robert Mellor told Investment Adviser last month that UK active managers are “hunting for other businesses” as they seek to diversify their offerings, and Mr Bounie suggested this trend could play into the rise of the “multi-boutique” model.

A look at the path taken by the US asset management industry can shed some light on the future of fund groups across the Atlantic, said Mr Bounie, a director at the mergers and acquisitions advisory firm.

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“The European asset management industry is about 20 to 25 years behind the US,” he said. “There weren’t boutiques in Europe until the early 2000s.

“Now that there are some sizeable and valuable boutiques, you are going to see what happened in the US in the 1970s. It will be the rise of the multi-boutique model.”

The multi-boutique structure means a number of niche boutiques sit within a parent company. These subsidiaries have their own brands, but use the back-office functions of the parent company.

In the US, asset managers have been drawn together over fears about the “erosion of their businesses”, according to Mr Bounie.

BNY Mellon is a good example of the structure, he added. Its multi-boutique model encompasses several specialised investment managers, such as Newton, which have their own investment philosophies and processes but utilises BNY Mellon for distribution.

In recent months there has been other signs of the multi-boutique model emerging in the UK. Last year Martin Currie became the latest subsidiary of Legg Mason, for example.

This trend has been predicted for some time. In 2008, ratings agency Fitch warned traditional houses would be increasingly forced to buy a roster of specialist investment boutiques that have the skills to deliver alternative products to customers.

More recently, in 2012, consultancy Create went so far as to predict multi-boutiques were set to become the dominant operating model this decade.

But there remain several barriers to further adoption, not least the fact that some fund houses are wary of the merits of being acquired by a large US business, according to Mr Bounie.

These concerns may soon come to the fore, as Mr Bounie is seeing a number of US multi-boutique firms expressing interest in buying European asset managers.

“US groups want to get a foothold in Europe and buy up some of the more specialised asset management businesses,” he said.