Investments  

Advisers shun star managers for smaller players

Advisers shun star managers for smaller players

Advisers are increasingly abandoning big name fund managers in the hunt for smaller niche players who can better match their clients’ needs, according to research from FE.

Its report, which surveyed 200 financial advisers, revealed more are moving away from star managers to explore boutiques and lesser-known fund groups.

Advisers questioned in the study said brand was a low priority when choosing funds, with few being awestruck by big reputations.

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When 74 advisers were asked to name three funds they have invested in over the past 12 months, 222 of the funds named came from 82 different fund houses, including some less established names.

More than half of the top 20 investment managers in the league table for adviser research were boutiques, while the bottom 15 - which have seen the biggest fall-off in adviser research interest - were all well-known names.

Charles Younes, research manager at FE, said advisers currently have a thirst for fresh ideas and approaches.

“Star managers, although high performers as the name suggests, are expensive and pose problems when they leave – succession planning, outflows to name a few,” he said, pointing to a shift towards a more team-based investment approach.

This follows a report from PricewaterhouseCoopers which predicted a cut in star manager pay packets as asset managers move to team-based incentives instead.

Mr Younes said: “Asset management firms see a star manager as one of the biggest individual threats to their business, at a time when there are already many potential issues in the horizon.

“It makes sense to take a team-based approach and mitigate possible future problems.”

Mika-John Southworth, director at FE, added the research highlights how much work the adviser industry is putting into selecting the best solution for their clients.

Matthew Harris, director of Fife-based Dalbeath Financial Planning, said: “Anyone who thinks that a ‘big name’ is more likely to deliver outperformance hasn’t been paying attention to fund performance statistics.

“Having said that, I don’t think small fund management firms are any more likely to outperform than big ones.

“I also don’t think that funds from smaller firms offer something that meets client needs in a way that big firms can’t or don’t match, so I suspect this isn’t a longer term shift.

Mr Harris added: “Chasing the next ‘star’ manager is a waste of our time and our client’s money, whatever the size of the firm.”

katherine.denham@ft.com