Regulation is the greatest threat to success for boutique asset management firms, according to the third annual edition of a research report carried out by TABB Group on behalf of SunGard.
Growing complexity has led to 42 per cent of participants in 2014 citing regulation as the major focus for firms, from just 17 per cent in 2013 – highlighting the significant challenges boutiques now face.
While boutiques remained most concerned about the Dodd-Frank Act with 65 per cent reporting it had a high to moderate effect in terms of overall impact, new regulations such as anti-money laundering regulations (AML) and the financial transaction tax (FTT) were highlighted across the globe as growing areas of concern for boutique firms.
“For boutiques to succeed it is no longer just a case of growing assets and returns, increased transparency, operational efficiency and the ability to deliver stable, risk-adjusted returns, within a resilient infrastructure, will be critical for the new boutique asset managers to help ensure operational stability. Whether efficiency comes from internal technology, managed services or outsourcing, our research finds these solutions will enable and empower boutiques to focus on their core strengths,” says Rebecca Healey, senior analyst, TABB Group.
“Previously, traditional asset managers had the advantage of scale and breadth; however regulatory constraints may yet play into the hands of the boutiques as niche funds continue to attract capital from investors seeking outsized returns. Fully automated processes that deliver the necessary transparency, accountability and efficiency will help boutiques to survive in today’s competitive environment. The new era of boutique asset managers will not only be a more selective one, but with the right partnerships it will help empower investment decisions and improve controls to better tackle growing regulatory requirements,” says Ed Lopez, executive vice president, SunGard's asset management business.