What is a 'Boutique'

A boutique is a small financial firm that provides specialized services for a particular segment of the market. Boutique firms are most common in the investment management or investment banking industries. These firms may specialize by industry, client asset size, banking transaction type or other factors to address a market not well-addressed by larger firms.

BREAKING DOWN 'Boutique'

Smaller players in the financial segment may prosper by positioning themselves to serve a specific niche. Although they may lack some of the resources of larger firms, boutique firms aim to offer more individualized services and tailor their offerings to the needs of their clients. Boutique firms are often founded by former employees of larger firms who wish to strike out on their own. Working at a boutique firm offers an alternative for finance professionals who are looking for something different from the large-firm experience.

Boutique Investment Banks

In the first half of 2015, boutique investment banks captured 16% of U.S. merger and acquisition (M&A) activity; they have consistently taken a larger share of M&A activity since the global financial crisis in 2008. This may be due to the large number of boutique financial service firms that were established over that period. Prominent boutique investment banks include Centerview Partners, Liontree Advisors and PJT Partners.

Performance of Boutique Investment Managers

Boutique investment managers have outperformed in a number of key measures since the mid-1990s, providing investors with superior value over the long term. Boutiques have outperformed non-boutiques in nine of 11 equity product categories on an annual basis by 51 basis points (bps). Investors in boutiques have enjoyed an 11% greater return on investment (ROI) than non-boutique investors. Boutiques have significantly outperformed the benchmark indices; the typical boutique investment strategy has outperformed its benchmark index in nine of 11 equity product categories annually by 141 bps. The best-performing boutique strategies, which include top-decile and top-quartile, returned a cumulative total of 1,722 bps after fees.

Why Boutique Investment Managers Outperform

Finance professionals who start boutiques have a vested interest ensuring their firms succeed and are prepared to commit large amounts of time and capital for long-term growth; this aligns the boutiques' and investors' interests. Entrepreneurship characterizes the culture of many boutique firms, which attracts talented investors and portfolio managers who are often known for their investment prowess. Boutiques often have a partnership structure, allowing their cultures to be nimble, encouraging innovation and responsiveness. Boutiques typically hire portfolio managers across different generations to provide a more holistic perspective and the ability to specialize in specific niches.

RELATED TERMS
  1. Peer Perform

    Peer Perform is a stock rating used by analysts that roughly ...
  2. Investment Management

    Investment management is a generic term that most commonly refers ...
  3. Broker-Dealer

    Broker-dealer is used in U.S. securities regulation parlance ...
  4. Small Firm Effect

    The small firm effect is a theory that holds that smaller firms, ...
  5. Investment Manager

    An investment manager is a person or organization that makes ...
  6. Golden Geese

    Golden geese refers to a source of a lot of money, big spenders ...
Related Articles
  1. Managing Wealth

    Should You Work At A Boutique Investment Bank?

    Boutique investment banks are consistently increasing their marketshare. Should you consider a job at a boutique instead of a large multinational investment bank?
  2. Investing

    Career Choice: Bulge Bracket vs. Boutique Bank

    Bulge bracket banks offer higher salaries and prestige, but boutique banks may offer better work/life balance and job security.
  3. Financial Advisor

    Principal Global Investors: Investment Manager Highlight (PFG)

    Learn about the investment operations of Principal Global Investors, the Principal Financial subsidiary with more than $360 billion in assets under management.
  4. Investing

    Soul Cycle vs. Planet Fitness (PLNT)

    How has the fitness industry's shift from multipurpose health clubs to specialized studios and budget gyms played out for SoulCycle and Planet Fitness?
  5. Managing Wealth

    Best Places for Luxury Shopping

    You often have choices on where to buy clothes from your favorite designers. What are the pros and cons of each, and where do you go first?
  6. Investing

    Top Investment Banks In The Energy Industry (JPM, C)

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  7. Managing Wealth

    Where Millionaires Prefer to Stay

    A recent survey from New World Wealth revealed that the Bellagio is the preferred hotel of the rich, with New York’s famous Plaza coming in second.
  8. Investing

    Uncovering the Securities Firm

    Learn about the various departments of a securities firm and the professionals who work there.
  9. Financial Advisor

    Be A One-Stop Shop For Your Clients

    Offering a comprehensive suite of financial services can bring in business, but coordination and customization are key to success and customer retention.
  10. Financial Advisor

    7 Designations For The Sell Side

    While all of these designations demand a substantial commitment in time, money and effort, the end result is worth it.
RELATED FAQS
  1. Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional ... Read Answer >>
  2. What's a Typical Day for Someone in M&A?

    Financial professionals in M&A have a very specialized role. Check out their typical duties. Read Answer >>
Trading Center