Until recently, Frank Sands Jr., president of Sands Capital Management, has enjoyed an enviable track record. Not only did he successfully steer the boutique money manager founded by his father through the technology stock collapse and the ensuing bear market, he also grew assets roughly 20-fold, from $946 million in 2000 to $19 billion at the end of 2005. Since the firm’s inception in 1992, Sands Capital has topped the Russell 1000 growth index every year except 1993 and 1997, when it fell only slightly below its benchmark.

Lately, though, the Arlington, Virginia–based firm’s reputation has suffered. Like many boutiques, Sands Capital grew in part by undercutting its competitors with low fees. But last year the firm raised prices on two large pension fund clients, The Florida State Board of Administration and the Teachers’ Retirement System of the State of Illinois. Both terminated Sands Capital, withdrawing a total...