The flood of boutique asset managers launching in Europe is
a reflection of soaring demand for riskier strategies that
enhance the so-called cheap beta returns dominating portfolios,
according to some of the fund managers behind the trend.
Russ Oxley, a well-known fund manager in the UK; Pascal
Duval, the former EMEA CEO at Russell Investments; hedge fund
star Michael Cowley; and respected Spanish value investor
Francisco García Paramés are among the
high-profile names planning new ventures. (Michael Cowley did
not respond to a request for comment. Francisco García
Paramés could not be reached for comment.) Oxley had
joined Old Mutual Global Investors in 2015 to head up the rates
and LDI team after building a £4 billion ($4.9 billion)
absolute return government bond fund for Ignis, the UK fund
group later acquired by Standard Life Investments.
But, having joined OMGI in April 2015, he surprised some
market commentators by departing just 14 months later. He is
now putting in the ground work for a project that he says
may, or may not, lead to a fund launch.
Oxley says challenging market conditions are
encouraging stewards of capital to choose a mixture of cheap
beta and diversified alpha strategies for their portfolios.
Setting up on your own allows you to build things
expressly for the purpose of client welfare and design
everything you need to maximize a client return, he
explains. The industry is struggling with fee compression
in traditional active management. This is being eroded further
by the growth of passive.
He suggests that the response to that should be an increase
in risk appetite on the
active management side. Existing mandates and
[incumbent manager] set ups are not necessarily well placed to
increase that risk appetite, he says.
Oxley instructed his legal team in Scotland to register the
brand Avrox with the UKs Intellectual
Property Office in anticipation of a launch, and has, so far,
given scant details of any strategy, stating only that there
are attractive opportunities in liquid
Pascal Duval, the former chief executive of Russell
Investments EMEA operation, is another globally-renowned
figure branching out on his own. He agrees with Oxleys
assessment and says institutional asset management will become
increasingly tricky for established players.
Large asset owners across the globe are trying to cut
costs, he says. They are cost focused, both
internally on how they run their operations but, also, in how
they use external managers.
Duval highlights local authority pension funds in the UK and
the so-called insourcing at sovereign wealth funds as examples
of the changing institutional investment landscape.
There will be less money around and there are too many
people competing for that money, he says. There are
price pressures, and there is a tougher regulatory
Duval left a 22-year career at Russell in October last year.
At the start of 2017, he announced he was setting up Duval
Capital, a business with a solutions arm to assist wealth
managers meet return targets and an advisory arm for
Like Duval, Oxley advises investors to ask tough questions
of their active managers. Specifically, he says there are three
things to look for: First, are they paying more than 20 percent
for the risk that is being run in total? Second, is the manager
running the stated level of risk? And finally, is the manager
While it can be daunting for established individuals to walk
away from careers at global financial behemoths, there are
plenty of success stories.
During the global financial crisis a week before the
demise of Lehman Brothers specialist fixed income
manager 24 Asset Management set up shop in the form of a
partnership between a handful of financial professionals. Today
it manages £9 billion in assets.
Mark Holman, the firms chief executive, said investors
can certainly benefit from the nimble application of ideas
within boutique fund firms, but he warns that clients expect
the execution of ideas not to look or smell any different
than they would at a large firm like Pimco.
Holman, a former managing director at Barclays Capital,
agrees that the current extended market cycle, where beta
performance has been okay, means more is being asked of active
managers. He says talented fund managers who have the
confidence to go it alone need only a catalyst to
The founding partners at 24 had one thing in common
we had all worked for large institutions our entire
working lives, he says. In a large firm,
interference can be quite a large percentage of your working
life. But potential minus interference equals