A Multi-Boutique Moves Out of Startup Phase and Into Running Fast
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Wednesday, August 31, 2022

A Multi-Boutique Moves Out of Startup Phase and Into Running Fast

A three-year-old multi-boutique asset manager's team is on the hunt for more portfolio managers to add more boutiques to their umbrella. One of the top firm's top executives offers some insight into what they're looking for.

Alexander Robert "Alex" Morris
F/m Investments
President, Chief Investment Officer
"We're sort of moving out of startup phase into and running-fast phase," Alex Morris, president and chief investment officer officer of F/m Investments [profile], tells MFWire. "The welcome sign and mat are out!"

F/m already has half a dozen boutique affiliates, some in equities and some in fixed income. With one exception, those boutiques are DBA entities of F/m itself, and combined they have about $4 billion in AUMA (including $1.5 billion in AUM) and about 30 people, and this month F/m debuted its first three ETFs. Watch for the F/m team to add more boutiques to the fold.

"There's probably room for another six to eight, depending on what they do," Morris says. "We'll try to avoid having two direct competitors on the platform."

"We're scaled to the point where we could add a manager every quarter, and the systems, the people, the business is fully ready for that," Morris adds. "We probably have two to three calls a week with new folks ... You've got cast a wide net to find the right folks to make this work."

F/m intentionally didn't enter the alternatives space in the firm's early days, Morris notes. Yet he says they are interested in making that shift now.

The F/m team specifically looks for what they described as suboptimized portfolio management talent, PMs in difficult spots but with good track records. Examples include strong PMs that find themselves in struggling (or shuttering) companies, PMs that are part of M&A transactions that don't seem to work, and so forth. Morris describes meeting someone who was part of "the disgruntled portfolio manager network."

"Once you meet one, they introduce you to all of their friends. There was just this embarassment of talent that was suboptimized," Morris says. "Our platform really was designed to be a great home for those folks."

The F/m team offers those PMs scale by putting together various systems (like Bloomberg and Clearwater), handling sales, and more. The idea is to mimic a "large, established, high-caliber, institutional asset manager," while letting the PMs focus on what they do best. (F/m tends to the be the majority owner of each boutique, while the PMs retain stakes. Each boutique has separate, pro forma P&L.)

"Just focus on things you're good at ... [Portfolio managers] are people first, and they're really great at being portfolio managers," Morris says. "They really shouldn't be worried about HR and finance ... They should be focused on managed portfolios and serving clients, full stop."

"The startup costs are what kill you. It's not the ongoing costs," Morris adds. "We just rolled our sleeves up and did it ourselves ... It's all of the capabilities you'd expect to see at a large institutional manager, without all the large institutional stuff that you expect to go along with it."

The F/m focus, Morris says, is on small firms with a story. Targets ideally manage between $50 million and $1 billion in assets.

"We want to see some assets ... enough assets and a loyal base that you're going to have a business that we can grow from," Morris explains. "Just an idea and a spreadsheet is not really something we're totally equipped to do at this point."

"Most of these managers have a loyal fan base. It's just not huge yet," Morris says. "They're kind of stuck in first or second gear and they can't shift out of it."

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