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. Advisory Management

    Advisory management refers to the provision of professional, ...
  3. Economic Forecasting

    Economic forecasting is th process of attempting to predict the ...
  4. Broker-Dealer

    Broker-dealer is used in U.S. securities regulation parlance ...
  5. Investment Manager

    An investment manager is a person or organization that makes ...
  6. Conglomerate Merger

    A conglomerate merger is a merger between firms that are involved ...
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. Financial Advisor

    M&A Advisory Business Boutiques: How The Small Shops Are Capturing Large M&A Deals

    M&A advisory boutiques are becoming a big business, giving large investment banks a run for their money.
  3. 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.
  4. Personal Finance

    Bulge Bracket Vs. Mid Market Vs. Boutique Investment Banks

    Obtain a detailed description of the primary differences between the various types of investment banks: bulge bracket, middle market and boutique.
  5. 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.
  6. 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?
  7. 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?
  8. 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.
  9. Investing

    Top Investment Banks in the Sports Industry

    Find out why the top investment banks in the sports industry tend to be smaller niche players and are prepared to battle the Wall Street giants for business.
RELATED FAQS
  1. What is the difference between portfolio management and financial planning?

    Understand the difference between financial planning and portfolio management, and learn which financial professionals can ... Read Answer >>
Trading Center