This is according to David Jane, manager of the £30m TM Darwin Multi Asset fund and former head of equities at M&G. He says his experience of running funds for both tiny and enormous wealth managers has given him an insight in to the pros and cons of each, and that only boutique funds allow him to effectively apply his high-conviction style.
"There are certainly process advantages [to boutique funds], as even when I was head of equities at M&G, there was slower decision-making," he said.
"There was that feeling that you couldn’t buy this or sell that in case you might affect one of your colleagues. Then there were sales decisions, so if I made a mistake – which we all do – you had to be accountable to your colleagues."
"There could be the danger that you might hold something longer than you should to save yourself the embarrassment of owning up to your mistake."
"I think I certainly make higher-conviction decisions now because I am not thinking, 'what will other people in the firm think?'"
Although Jane champions the benefits of running a boutique fund and clearly enjoys the freedom it allows, he says the resources he had at his disposal at M&G were very useful.
"If you are in a business that is a big player, you do have a huge amount of resources available. We had over 30 people in the call centre and 50-odd sales people on the road."
"There was a huge fund development team and at one stage we had seven people in the press office – which meant we could get the funds and information out to journalists effectively and efficiently."
"There were certainly advantages on the distribution side; however it also meant that the client didn’t ever get to meet the management team. I now get to talk to clients face-to-face – which I really enjoy doing."
"To be honest, working at a bigger firm had both advantages and disadvantages. For instance, having a vast amount of internal resources was really good but it could also mean you became internally focused, almost just sticking to the group’s way of thinking."
"When I was at M&G, we tried not to over-process the funds anyway. We tried to keep them focused and just have one manager in charge; I think that is something that retail investors appreciate."
Jane started running equity portfolios at M&G in 2003. He developed an impressive track record, returning 107.48 per cent over the past 10 years compared with 86.51 per cent from his peer group composite.
Performance of manager vs peers Mar 2003 to Jun 2010
Source: FE Analytics
At M&G he managed seven portfolios, including M&G Episode Growth and M&G Cautious Managed, and at certain points he ran more than £1bn worth of investors’ assets.
Now he runs just £30m; however the manager says he has not drastically changed his investment approach because it would be dangerous to do so.
"I don’t run it as if it was a small fund, I think that is one of the mistakes managers can make because they find themselves in smaller, less liquid situations when their portfolio grows in size," he said.
"I run the fund as if it was £1bn, so there isn’t any liquidity advantage."
Since he set up the TM Darwin Multi Asset fund, it has been a consistently strong performer in the IMA Mixed Investment 20%-60% Shares sector.
It has returned 14.46 per cent since launch, compared with 11.24 per cent from its peers. It has participated fully in the recent rally and is the third best-performing fund in the sector so far this year.
TM Darwin Multi Asset has returned 10.29 per cent since 1 January, nearly doubling the returns of its peers.
Performance of fund vs sector since Jan 2013
Source: FE Analytics
Jane does not take a bottom-up view of the equity markets, but likes to take in the macroeconomic environment when assessing his portfolio.
"I call it global thematic and there are two drivers when investing in equities," he said.
"The first one is portfolio construction, to give us a diverse asset allocation. The second is long-term themes we want exposure to – we are never trying to beat an underlying equity index and be too clever."
"I am trying to paint a picture, so I need the paint to fill the pallet, so to speak."
"A lot of people analyse a company’s forward earnings and balance sheet, and it works for them, but it isn’t something I concentrate on."
"However, I am looking for long-term delivery from the companies I invest in."
Jane’s portfolio has 65 holdings, with 49 per cent of his £30m fund in equities and 22 per cent in fixed interest.
Deutsche Bank is his largest individual equity position. He also holds a number of US index linked government bonds and the iShares JPM Emerging Markets Bond fund in his top-10.
TM Darwin Multi Asset has an ongoing charges fee (OCF) of 1.92 per cent and requires a minimum investment of £1,000.