Regulation is the greatest threat to success for boutique asset management firms, according to research undertaken by TABB Group and funded by financial technology and services provider SunGard.

Growing complexity has led to 42% of participants in 2014 citing regulation as the major focus for firms, from just 17% in 2013.

“For boutiques to succeed it is no longer just a case of growing assets and returns. Increased transparency, operational efficiency and the ability to deliver stable, risk-adjusted returns, within a resilient infrastructure, will be critical for the new boutique asset managers to help ensure operational stability,” said Rebecca Healey, senior analyst at TABB Group.

“Whether efficiency comes from internal technology, managed services or outsourcing, our research finds these solutions will enable and empower boutiques to focus on their core strengths.”

Boutiques remained most concerned about the Dodd-Frank Act with 65% reporting it had a high to moderate effect in terms of overall impact.

New regulations such as anti-money laundering regulations (AML) and the financial transaction tax (FTT) were also mentioned across the globe as growing areas of concern for boutique firms.

“Previously, traditional asset managers had the advantage of scale and breadth; however regulatory constraints may yet play into the hands of the boutiques as niche funds continue to attract capital from investors seeking outsized returns," said Ed Lopez, executive vice president, SunGard's asset management business.

"The new era of boutique asset managers will not only be a more selective one, but with the right partnerships it will help empower investment decisions and improve controls to better tackle growing regulatory requirements.”