I've heard a number of references recently to "boutique fund managers", often suggesting a different meaning of the term than my understanding of it. To me, it comes down to a combination of three things - ownership, size, and investment specialisation (or niche products). Some people will disagree with one or two of these elements; others will place a greater emphasis on one over the others.  I'd be interested to hear other people's views on this.

‍Ownership

‍With ownership, it seems to me that the asset managers involved in a boutique do not necessarily have to own 100 percent of the business, but they do need to have a big enough stake to give them real influence and empowerment. Investors can then feel confident that the people who handle the money are unlikely to leave, as they have a large part of their own wealth locked in to the business structure they work for. 100 percent ownership, or even majority ownership, is not always necessary. The actual structure of a boutique fund manager can therefore vary. Other institutions may provide an incubator role, or it could be a joint venture model where a partner provides a range of other services as well as funding. Having an institution involved doesn't necessarily disqualify the business from being a boutique.Indeed, partners can be very useful. An asset manager may be brilliant at managing money but not so good at running a business, and will find support from a bigger entity very comforting.

‍Specialisation

‍Because boutique fund managers are often set up by portfolio managers who have earned reputation managing money in another business, they tend to specialise in one asset class. So, having a niche market very much fits any definition of a boutique manager. It seems to me that being recognised as a specialist with particular skills in one area is one of the major marketing strengths of a boutique manager.

‍Size

‍Synonymous with the term "boutique manager" is the ability to move quickly in the market. It follows that being small and nimble is an important characteristic. But how big is too big? This is difficult to define and clearly depends on the asset class a manager specialises in.In Australian equities, an upper limit might well be $5 billion - any more, and moving quickly may be difficult. However, a manager specialising in international shares or bonds could possibly have much larger FUM and still claim to be a boutique manager.It would be good to have common recognition of what the phrase "boutique fund manager" means.