Independent Boutique Active Managers Are Best Positioned to Navigate Market Volatility
AMG Announces Release of New Study: The Independent Boutique Advantage in Volatile Environments
- Independent boutique active managers outperformed both non-boutique active managers and passive indexing over the past 20 years, delivering the highest excess returns during periods of elevated volatility
- Independent boutiques outperformed passive indexing in 11 of 11 product categories and non-boutiques in 10 of 11
- Boutiques produce an average 241 bps of excess returns relative to passive indexing during highly volatile periods
- Greatest outperformance by boutiques in
Global Equities, Emerging Market Equities, and Small Cap Equities
“The unprecedented volatility in the market today is prompting investors to consider whether they can afford to take a passive approach to managing their portfolios,” said
Key Highlights from the Study:
The analysis found that over the last twenty years:
- Independent active boutiques delivered nearly 3x excess returns against passive indexing when volatility was high: The average boutique outpaced its relative index in all 11 equity product categories and delivered 241 basis points of net excess returns relative to indices in periods of elevated volatility, compared to 82 basis points of outperformance during all other periods.
- Independent boutiques significantly outperformed non-boutiques in periods of elevated volatility: The average boutique outperformed the average non-boutique in 10 out of 11 equity product categories by an average of 116 basis points in periods of elevated volatility and 41 basis points in all other periods.
- Above-average levels of volatility create advantageous levels of dispersion: Extreme market disruptions and high levels of volatility are not prerequisites for boutique alpha-generation, as reflected by the dispersion of excess returns across the volatility percentiles. Rather, above-average levels provide asset dispersion which enhances the outperformance of active managers.
AMG’s business was founded nearly three decades ago on the principle that, given fundamental characteristics, independent active boutique investment firms are best-positioned to generate excess returns over the long-term. The core characteristics that position boutiques to deliver consistent, superior long-term investment performance include:
- Principals have significant, direct equity ownership, ensuring alignment of interests with clients;
- Presence of a multi-generational management team, fully engaged across the business;
- Investment independence and operational autonomy fostering an entrepreneurial culture with a partnership orientation, which attracts and retains the most talented investors;
- Investment-centric organizational alignment, including setting capacity limits to remain nimble; and
- Principals are committed to building an enduring franchise, embedding an appropriate long-term orientation.
To review this analysis in full, download “The Independent Boutique Advantage in Volatile Environments” at https://amg.com/the-boutique-advantage
Methodology: The Independent Boutique Advantage in Volatile Environments
The study incorporated data from more than 1,300 investment management firms around the world and nearly 5,000 institutional equity strategies encompassing approximately
The classification of firms as either “boutiques” or “non-boutiques” was based on AMG’s proprietary analysis, while the MercerInsight® database was utilized for return data. Primary indices for comparison included MSCI Emerging Markets,
The classification of investment managers and their corresponding strategies as “boutiques” in the study was based on four criteria. First, principals were required to hold a significant amount of equity in their own firms, defined as at least 10 percent ownership. Second, investment management was the sole focus of each firm; investment managers captive in broader financial services platforms were excluded. Third, firms with assets under management greater than
AMG is a global asset management company with equity investments in leading boutique investment management firms. AMG’s strategy is to generate long-term value by investing in leading independent active investment managers, through a proven partnership approach, and allocating resources across the Company's unique opportunity set to the areas of highest growth and return. AMG’s innovative partnership approach allows each Affiliate’s management team to own significant equity in their firm while maintaining operational autonomy. In addition, AMG provides centralized assistance to its Affiliates on strategy, marketing, distribution, and product development. As of
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws, and could be impacted by a number of factors, including those described under the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K, as such factors may be updated from time to time in our periodic filings with the
Source: Affiliated Managers Group, Inc.