We asked over 200 boutique asset management executives: What's the single thing that could make or break your firm in the next year? The answers to this and other questions represent unique perspectives and expertise from 38 countries. The survey results have been analysed by Tabb Group and show the devastating effect of the mounting regulatory burden on specialist and regional investment managers.

1. REGULATION NOT MEASURING UP?
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© SunGard Financial Systems

2. BACKGROUND TO RESEARCH
We asked: What's the single thing that could make or break your firm?
GLOBAL
REACH
Boutique Participants
1
64
Canada
Middle East
& Africa
Other
U.S.
Latin &
S.America
Asia
Pacific
Europe
www.sungard.com
Analysed by TABB Group

3. DEFINING BOUTIQUE
START UP
ESTABLISHED
Founded by fund manager leaving a
larger firm, often taking a client book and
some trusted colleagues with him.
Priorities are establishing a marketing
presence, setting up basic infrastructure,
and keeping/ reeling in the first ten
investors, in addition to investing own
money
Support staff are in place, assets are
growing, firm has established a track
record and credibility. Focus is on
building on successes, upgrading
infrastructure to deal with increased
demand
ENTREPRENEURIAL
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NICHE
SMALL STAFF
GET BIG
OR GET BOUGHT
The boutique either grows organically
and may slowly become more
bureaucratic with larger staff and slower
decision-making, OR get acquired by a
larger firm and be run autonomously as a
specialist investment unit. This also
includes regional subsidiaries of larger
houses
STAFF CO-INVEST
FOCUS ON CORE
COMPETENCIES

4. KEY FINDINGS
(1) REGULATORY REACTION
A myriad of regulation affects different boutiques around the
world. Top of the list for the next year: AIFMD, followed by
Dodd Frank, local regulations, UCITS, MiFID, FATCA, AntiMoney Laundering, EMIR and Solvency II
(2) COST OF COMPLIANCE
Boutiques are investing, and dollars are
being spent on documentation (#1), IT (#2) and people (#3)
(3) REGULATORY SIDE EFFECTS
The effects of regulation on boutiques are increased cost
(#1) and the need for better IT systems and documentation
(#2) to satisfy institutional investors
www.sungard.com

5. KEY FINDINGS
(4) BARRIER TO ENTRY
Institutionalization – the growing list of things asset
managers need to do to satisfy regulation and due diligence
demands – is the main barrier to entry and success for new
asset managers
(5) TIME TO TAKE ACTION
Increasing expenses related to regulatory compliance
are the one thing that boutiques think could make or
break them over the next year. They know they need to
invest now, but be smart about it
>>>SIZE MATTERS
Scale is the feature that boutiques know they lack, and
technology and better operational efficiency are the keys to
overcoming this disadvantage. 9 out of 10 respondents
thinks “Technology can help my business meet growth
challenges and satisfy increased demands”
www.sungard.com

6. HOW BUSINESS IS CHANGING
The biggest barrier to entry among the participants in our
2013 survey is the “institutionalization” of the industry that
leads to higher due diligence and compliance costs.
2012 RESULTS
2013 RESULTS
52%
Cost of operations
47%
Institutionalization – burden of due
diligence and compliance
45%
Ability to show institutional
grade control systems
37%
51%
Cost of operations
44%
44%
43%
Ability to show institutional grade
control systems
Local or regional regulation related to
administration, registration, licenses
29%
27%
IT investment – setup and development
IT Investment – setup and
development
Staffing constraints – e.g.
inability to offer managed accounts
Institutionalization – burden of due
diligence and compliance
Investor focus on historic returns
Regulation
Other Option
Similarly, “the ability to show institutional grade control
systems” has also become a bigger component in
deterring newcomers.
26%
18%
9%
Local or regional regulation related to
distribution and asset raising
Fragmented global regulation making it
hard to raise assets globally
Other Option
22%
20%
11%
Industry model – lack of front end fees
Staffing constraints – e.g. inability to
offer managed accounts
www.sungard.com
7%
6%
Sources: TABB Group, SunGard

7. PAYING THE PRICE OF REGULATION
WHAT DO YOU SEE AS THE MAIN FACTORS
THAT COULD ‘MAKE OR BREAK’ BOUTIQUE
FIRMS IN THE NEXT 12 MONTHS?
THE MOST PROBLEMATIC ISSUE
FACING BOUTIQUE MANAGERS
IN THE NEXT 12 MONTHS IS THE
Increasing expenses related
to regulatory compliance
53%
Key person risk – founder
leaving
46%
36%
Rising cost-to-income ratios
IT IS NO SURPRISE THAT COSTS
ARE GOING UP AS NEW
REGULATIONS ARE IMPLEMENTED
AND ENFORCEMENT AGENCIES
INCREASE THE AMOUNT OF
INSPECTIONS AND REQUESTS
FOR INFORMATION
Economic slowdown in
Asia esp. China
Sovereign debt crisis
Other Option
www.sungard.com
Source: TABB Group, SunGard
11%
9%
7%

8. WITH THE BENEFIT OF HINDSIGHT…
YOU TRAVEL BACK IN TIME to the year your investment boutique
was first launched.
Which advice would you give/what would you do differently?
?? ?
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9. WITH THE BENEFIT OF
HINDSIGHT…
Think big from the very
beginning in terms of
process/IT/Regulations
need, people, revenues
& associated costs.
Participant from Georgia, USA
Source: TABB Group

10. WITH THE BENEFIT OF
HINDSIGHT…
Better
documentation, improve
d capture of fund
activities and
history, better equipped
to navigate regulatory
requirements.
Participant from Singapore
Source: TABB Group

11. WITH THE BENEFIT OF
HINDSIGHT…
Set up infrastructure
& design before launch.
Participant from the UK
Source: TABB Group

12. WHAT ARE THE TOP THREE
DISADVANTAGES FACED BY BOUTIQUES?
65%
Lack of economies of scale
Restricted access to distribution channels
61%
47%
Administration burden
31%
Limited IT budget
Lack of industry organization/industry
representation
23%
Fragmented front to back systems
(lack of integration)
19%
13%
No political influence
Anachronistic processes & systems
Other Option
www.sungard.com
12%
6%

13. WITH THE BENEFIT OF
HINDSIGHT…
Advice: Outsourcing is
definitely the way to go in order
to focus on core competencies
and provide a scalable platform
for significant growth.
Do Differently: Don't be afraid
to overstaff (administratively)
in the beginning.
Participant from New Jersey, USA
Source: TABB Group

14. WITH THE BENEFIT OF
HINDSIGHT…
Focus on doing what you
do best. Build distribution.
Be patient.
Participant from South Africa
Source: TABB Group

15. THE ROLE OF TECHNOLOGY
Technology can help
my business meet
growth challenges
and satisfy increased
demands
Strongly Agree
Straight Through
Processing (STP)
is the key to achieving
operational efficiency
ASSET ARENA 360
HELPS BOUTIQUES
Strongly Agree
Agree
Undecided
Disagree
Strongly Disagree
Agree
Undecided
Disagree
Strongly Disagree
Boutiques should
focus on core
competencies and
outsource the rest
Strongly Agree
Agree
Undecided
Disagree
Strongly Disagree
www.sungard.com

16. WITH THE BENEFIT OF HINDSIGHT…
Add the software and
technology, so that a
smaller number of
employees can be
more efficient.
Participant from Virginia, USA
www.sungard.com

17. USUAL BOUTIQUE BUSINESS
COMPLIANCE
MANAGER
SALES
PERFORMANCE
OPERATIONS
REPORTING
www.sungard.com
RISK

18. RESPONDING TO THE
INSTITUTIONALIZATION OF THE INDUSTRY
COMPLIANCE
MANAGER
SALES
REPORT
ANALYZE
MEASURE
COMPARE
COMPUTE
PERFORMANCE
EXECUTE
REPORTING
www.sungard.com
OPERATIONS
SIMULATE
CONTROL
RISK

19. JOIN THE ASSET RAISING AUTOBAHN
CAR
REPRESENTATION
Mercedes-Benz
Solid track record
Audi
Mid-market consistency supported
by quality engineering
Rolls-Royce
Other Option
Volvo
High performance in a well-defined
niche
Jeep Grand
Cherokee
Provides protection and performance
in tough markets
Toyota Prius
Focus on green credentials and
sustainability
Rolls-Royce
Old school asset manager for old
money
Honda
Mercedes
-Benz
Toyota Prius
Stable returns
Ferrari
Good value for a standard product
Jeep Grand
Cherokee
Ferrari
HOW CAN BOUTIQUES ACHIEVE
www.sungard.com
Honda
Sources: TABB Group, SunGard
Audi
Volvo

20. ASSET ARENA 360 ADVANTAGE
QUALITY
ENGINEERING
FOR DEMANDING
ASSET MANAGERS
INTEGRATED
COMPLIANCE AND
RISK MANAGEMENT
SMOOTH
INVESTMENT
WORKFLOWS
ROBUST
INFRASTRUCTURE
EFFICIENT
PROCESSES
www.sungard.com

21. THANK YOU. QUESTIONS?
Contact assetarena@sungard.com
ASSET ARENA 360
RAISE ASSETS
FOCUS ON YOUR CORE COMPETENCIES
DELIVER PERFORMANCE
DOWNLOAD THE FULL REPORT AT
WWW.SUNGARD.COM/BAMSTUDY