When choosing funds it is usually the well-known fund management giants such as Invesco Perpetual, Fidelity International or Jupiter that spring to mind - often because their huge advertising budgets make sure that their names are prominent in the minds of investors.
However, it is often the case in the testing world of fund management that smaller, specialist 'boutique' fund managers offer more interesting strategies and deliver better returns than their larger higher profile rivals.
Many of these boutique fund managers have obscure names, and they usually don't advertise to investors or promote their funds to independent financial advisers.
There's no hard definition for the term 'boutique' - it certainly doesn't reflect any particular investment philosophy or focus. It's generally a matter of structure: boutique firms tend to be set up, owned and run by established fund managers themselves (in contrast to the bigger investment houses, which may be owned by banks or insurance companies or be public companies with shareholders).
The fund managers in these privately owned boutiques often have their interests aligned with those of investors as they own a large stake in the business. This encourages them to pursue top performance.
They often have the freedom not to follow stock market benchmarks and the flexibility to put a large slice of their funds' money in cash if they see no value in stock market investments. Although this investment freedom can mean that big asset allocation decisions hurt performance if the manager gets it wrong, the benefit is the managers tend to be happier and are more likely to stay put. Jumping ship to rivals tends to happen among star managers in the larger fund management groups, making life difficult for investors.
Unfortunately, some boutiques are difficult to access as, with fewer administrative resources, they prefer to stick to a handful of clients with large sums of money to invest. Some impose a high minimum investment requirement, which mean they don't qualify as ISA investments.
Some interesting boutiques worth looking at include Liontrust, PSigma and SVM.
Another boutique you may not have heard of is Troy Asset Management, which has only three funds, albeit quite interesting ones. Troy specialises in absolute returns, which is very popular among nervous investors at the moment. Few absolute return funds have proven themselves over any meaningful period of time, but the Trojan Fund has a solid track record. See also our .
A simple way of investing in boutique managers is through the Credit Suisse Multi manager Constellation Portfolio, which invests in boutique fund mangers globally for capital growth.
