Performance is never the only factor when it comes to attracting clients in the world of fund management.
Many boutiques have attracted money away from the large managers on the back of their black economic empowerment (BEE) credentials. Such managers include Renaissance, Argon, Mergence and TriLinear (see table).
And unlike the first generation BEE managers such as Prodigy and Infinity these ones have predominantly black investment teams.
Renaissance CEO Tebogo Naledi says now that the team has been together for three years it should begin to attract more interest from consultants. It battled in the first half of 2008, when resources outperformed the rest of the market, but it has recovered from this, being 10% ahead of the index since then. But performance is a fragile commodity and these firms need to build a following in other ways. One stage could be to develop a brand in the retail market through unit trusts.
Brand equity certainly helped Regarding Capital Management's (RE:CM) Piet Viljoen to keep his client base fairly intact during an atrocious first half of this year, which was followed by a strong revival. RE:CM is the top balanced and equity manager for the 12 months to the end of October.
With more than R10bn under management RE:CM is now out of the boutique category, though it still has a single philosophy and "product".
Much the same could be said of Polaris Capital and Fraters. Viljoen says that during the crisis he worked out that he would still remain profitable even if half his asset base walked out.
Investec Asset Management CEO Hendrik du Toit says that successful boutiques grow and succession planning is critical.
Fifteen years ago there would have been concerns if Du Toit had left, and in the mid-1980s there would have been concerns from Allan Gray clients if the man himself left. But in both cases the firms managed without the day-to-day involvement of their founders in the investment processes at their firms - they are now the two largest asset managers in SA if you exclude life assets.
Investec was able to break the stranglehold of the life offices on the pension fund market because of its close relationship with consultants such as Aleander Forbes. It was an early adopter of the multispecialist approach but it does not use terms such as franchise. "We are not a fast food business," says Du Toit.
