Is there a boutique asset management premium? Evidence from the European fund management industry

Abstract

There exists evidence in the performance evaluation literature that mutual funds that are manufactured by large asset management groups with large “fund families” benefit from economies of scale in terms of marketing, distribution and resourcing that accrue from the larger organisation. In this paper, we examine the performance of funds that are managed by “boutique” asset managers that tend to be small and which tend to offer a more focussed fund range. Using European mutual fund data, we find evidence to suggest the existence of a boutique asset management premium. This premium is particularly pronounced in the European Mid/Small Cap and the Global Emerging market fund sectors, where we find it to be both economically and statistically significant, a finding that is robust to the factor model used to calculate alphas. These results suggest, in particular, that if an investor is looking to invest in a European Mid/Small Cap or in an Emerging Market equity fund, then they should give serious consideration to investing with a Boutique fund manager.