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Small Asset Management Firms In Danger

Small asset management firms maybe in danger due to regulatory pressures.

The cost that comes with increasing staff or technology to handle regulatory pressure is a major concern to small asset management firms, according the “Boutique Business Model under Attack: Bruised by Regulation – Crippled by Cost?” commissioned by SunGard Financial Systems,, a software and IT provider.

[Read: Do Regulation and Customer Service Go Hand in Hand? to learn more.]

Besides raising assets, 51% of the respondents indicated the main barrier to start a boutique firm is the burden of due diligence and compliance. About 53% believed increasing expenses related to regulatory compliance could either make or break a boutique firm in the next 12 months.

Alternative Investment Fund Managers Directive will have the biggest impact on their business in the next 12-18 months, says 30% of respondent. While 29% believe Dodd Frank will have the biggest impact.

To combat regulatory pressure, primarily European boutique managers formed the Group of Boutique Asset Managers to share information to achieve the scale of a larger organization.

“There’s been a lot more coming together of the boutique asset managers, where the boutiques are having to combine and join forces at a minimum to share ideas,” says Edward Lopez, EVP of SunGard’s asset management business.

About 200 asset managers were surveyed for the report co-authored by TABB Group’s Adam Sussaman, partner and director of research and Valerie Bogard, research analyst.

Zarna Patel is a staff writer for InformationWeek's Financial Services brands, which include Bank Systems & Technology, Insurance & Technology and Wall Street & Technology. She received her B.A. in English and journalism from Rutgers University College of Arts and Sciences in ... View Full Bio

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Becca L
Becca L,
User Rank: Author
10/1/2013 | 3:12:48 AM
re: Small Asset Management Firms In Danger
It seems to me that boutique firms need to be more successful than
ever before just to get by. The bar is higher, and even with all the
outsourcing and providers out there, how can a fledgling company compete
against the industry veterans - even the smaller ones - who have more
understanding of the regulatory cracks they have to fill. Just understanding your vulnerabilities is more costly than ever. It's a dog eat dog world out there...
Greg MacSweeney
Greg MacSweeney,
User Rank: Apprentice
9/30/2013 | 4:15:55 PM
re: Small Asset Management Firms In Danger
Compliance burdens for smaller, or boutique, asset managers have been increasing for some time. Many are turning to outsourcing providers for help, but at the end of the day, there still has to be accountability from a compliance officer who works for the asset manager. It's a tough balancing act.
User Rank: Author
9/30/2013 | 2:38:41 PM
re: Small Asset Management Firms In Danger
If boutique firms are focused to a large extent on meeting compliance mandates, they may have less energy and resources to invest in the research and investment process. If they generate less alpha, that indeed will cripple their business. So are boutique asset managers outsourcing their compliance with AIFMD and Dodd-Frank?
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