A new survey has confirmed what market analysts had long suspected – larger, traditional fund management brands are losing market share.

According to the report from Lipper, firms with fewer than ten funds were responsible for more than a quarter of money coming into European funds in the first quarter of 2011.

News that private investors are waking up to the offerings of smaller investment boutiques and shunning the sometimes clumsy strategic management styles of their larger rivals is great news. It’s not that the larger fund houses are not achieving returns – they often are – but the financial crisis highlighted just how susceptible some over-lauded fund managers were to straying from their investment mandate to protect their own reputations. 
Investors in mainland Europe have long recognised this, but UK investors have taken longer to come around.

Ignoring the big sell
The Lipper report suggests that domestic investors are now paying much greater attention to smaller investment management businesses instead of following the misleading or heavy-handed tactics of fund management businesses’ overpaid PR people.

And, with investor awareness of smaller funds growing, coupled with the removal of commission previously paid to greedy financial advisers under new Retail Distribution Rules, the funds that people buy are on course to change.

Looking at performance alone, it is not difficult to see the appeal. Ruffer Investment Management is a prime example. Its European fund in the IMA Balanced Managed sector is the standout best performer over one-, three- and five-year periods cumulatively, while its Total Return fund in the Cautious Managed sector is also top of the charts over three, five and ten years.

Funds offered by Martin Currie (£1.4 billion of assets under management), Polar Capital (£1.9 billion) and JO Hambro Capital Management (£1.6 billion) are other mini fund houses worthy of a mention.

Thankless task
For me it is pleasing, as it can often be a frustrating and thankless task trying to educate investors that some of the fund managers held up as trailblazers are often nothing more than lucky. Financial advisers may push their funds because it is easier to justify a ‘celebrity’ manager to the regulators because of a) safety in numbers, b) past performance or c) press coverage that has been led by the spin doctors.

Of course, What Investment’s readers are a savvier bunch on the whole, but even our community is vulnerable to the heavy-handed tactics of some of the PR machines of these global companies unless we club together.

The best way to protect our portfolios, then, is to share information on those investment firms that have let us down, and as journalists we promise to take your issues straight to the top. These figures show that word is out on the underperforming, the arrogant and the complacent, but now we need to seize the momentum.

It is only by taking our frustrations and concerns to the doorsteps of these global firms that we can achieve cheaper funds, greater scrutiny and better accountability. As the report from Lipper shows, we are just starting to win the war.