“Basically, I like boutiques because it’s reassuring if a manager has a large stake in his own fund, which is common for boutiques. That suggest the manager’s interests are aligned with those of his clients, and that he will be a good father of the family, so to say,” Saba explains.
Another supposed advantage of boutiques is that the risk of a manager leaving is lower. Most boutique managers began their careers at a larger asset manager, to later start their own franchise or join a (smaller) boutique.
But going for boutique managers of course doesn’t eliminate key-man risk, Saba realises. “Even a manager who runs his own boutique fund could quit or lose his motivation. And normally a manager departure is a red flag for us.”
An example of a boutique fund Saba likes is the Oyster European Opportunities Fund. The fund is a living proof of the fact that boutiques are not immune to manager change. Launched in 2001, it is already on its third manager. Saba first invested in the fund on behalf of a client in 2013, when it was led by Eric Bendahan, who succeeded founding manager Nicolas Wasilewski in 2006.
When Bendahan was succeeded by Michael Clements in September 2014, Saba launched the proverbial red flag because Clements’ arrival basically amounted to the launch of a brand-new fund.
“Immediately after he took charge of the fund, Clements sold all the positions in the fund overnight to impose his own style on the fund,” explains Saba. Logically, he placed the fund under review.
“It’s a different fund now because Clements uses a different style, but I analysed the performance of the fund Clements managed at Franklin Templeton [the Franklin European Growth Fund], and that reassured me. So I decided to recommend to the client to keep the fund.”