If you are thinking of investing in a boutique fund with a fund manager, there are certain advantages that you can gain from it. Generally, these fund managers can be quite agile and their performance is quite high. There is more freedom to a boutique fund when it comes to the management of finances. The expertise of each boutique fund will be different.
When it comes to an Australian small companies fund, the fund manager has a thorough idea about the process of investing and their experience leads to an organized execution of the project. A fund manager has to be very quick and up to date with current market changes. When it comes to larger funds, the policies and philosophies of the company may get involved in the investment process. But the benefit of a smaller fund is that less time can be spent on the political side of the company and more time is dedicated to the investment itself. It is also much easier to handle a smaller fund. What happens when the fund grows bigger is that you will need to invest a larger amount of money in each stock to have a weight in your investment. This amount of money will increase as time goes on. However, with a smaller fund, you can invest in large capitalization funds without impacting the market in a big way. You will be able to buy and sell quite easily.
While a smaller fund can invest in large stocks, the reverse is not necessarily easy for a large fund. They will find it difficult to be in a larger position to affect the performance of the fund. So the growth of a fund is not always a positive factor as the fund manager will find themselves not being able to invest in opportunities that come up in the smaller market. So the general availability of stocks that you can invest in will reduce. You may miss out on good opportunities because of this. There is more at stake for a boutique fund manager when it comes to their investment. They will have their personal wealth invested in the fund as well. Therefore, they are personally motivated to perform well as the outcome of the fund has an impact on their savings and career. So there is a lot riding on the fund and they will be very careful and diligent about how they invest. Because of this motivation, they will double check a decision before carrying it out.
It is not always a given that small boutique funds are successful but they have a greater opportunity to outperform. There is a lot of research that you should do before you start investing in a company and taking their financial advice. Generally, boutique fund managers have experience at larger firms and they have a good idea about the trade. Investing independently can be very freeing as you don’t need to stick to the guidelines of the company and this can drastically restrict your methodologies.