Asset management is undergoing a transformation as technology and innovation drive substantial changes in how firms operate and compete. In a recent episode of Zephyr's Adjusted For Risk Podcast, Ryan Nauman, market strategist at Zephyr, sat down with Seb Stewart, Head of US Sales at Pacific Asset Management, to explore these shifts and what they mean for financial advisors.
A Changing Landscape in Asset Management
Ryan Nauman kicked off the conversation by acknowledging the evolving nature of the asset management space, where large firms are acquiring smaller ones, and product innovation has given rise to new ETF firms.
Boutiques and the Power of Agility
The conversation pivoted toward boutique or specialist asset management firms. Seb Stewart recently co-authored a research article titled "The Case for Boutiques," emphasizing the advantages of smaller firms, such as agility and independence. He explained how boutiques can maneuver swiftly, avoiding the bureaucratic inertia that often hinders larger organizations. "The agility of smaller asset management businesses both from an investment perspective and an execution perspective absolutely gives us a competitive edge," Seb remarked.
Navigating Risks and Embracing Opportunities
While boutiques offer numerous benefits, they do face challenges such as high operational costs, distribution hurdles, and succession planning. Seb addressed these issues, noting that Pacific Asset Management works to mitigate these risks by partnering with specialized boutiques and providing support in distribution and management.
Seb declared, “The million-dollar question is why should allocators consider boutique asset management firms?” He offered compelling reasons, including superior performance, aligned interests, and personalized client service. He emphasized that boutique firms often maintain better access to portfolio management teams, crucial for building trust and ensuring client satisfaction.
Venturing into the Active ETF Market
In a significant move, Pacific Asset Management recently launched an active ETF focused on emerging markets. The decision to opt for the ETF wrapper over a mutual fund was driven by factors such as transparency, accessibility, cost-effectiveness, and tax benefits. Seb viewed active ETFs as a gateway to the US market, offering unparalleled value to clients.
The Future of Emerging Markets
As the discussion wrapped up, Ryan Nauman touched on the promising outlook for emerging markets, noting their impressive performance and potential for continued growth. Seb echoed this optimism, pointing to favorable valuations and well-managed, innovative businesses poised to capitalize on emerging trends.
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