William Blair bullish on active management prospects

William Blair bullish on active management prospects

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Boutique manager William Blair is a firm believer in the importance of active management and the need for disciplined fundamental
research to successfully construct investment portfolios.

“The subsequent strong performance of our investment strategies, coupled with a highly client-centric approach, has been extremely well received by institutional investors, resulting in net positive inflows across all our investment strategies in 2015,” says Dan Charles, partner and global head of business development and client service.

As an independent, 100% active employee-owned business, Charles says that William Blair is able to focus solely on the needs of its existing client base rather than external commercial considerations.

“We make decisions based exclusively on what’s best for our clients’ investments. The key tenet of our culture attracts the industry’s top talent – and retains them.”

An example of this is its proactive approach to capacity management where, at the sole discretion of the investment team, it will close funds to new investors in order to protect the integrity of portfolios and ensure it can continue to deliver long-term performance. 

“The stability of our investment teams is at the core of our success that creates sustainable value for our clients,” says Charles. 

The firm is looking to grow its international footprint, alongside maintaining a strong presence in its domestic US market. It has also seen significant growth in Australasia and Europe, with the latter now accounting for nearly 10% of total assets under management (AuM).

“This growing global presence has also proved very helpful to its investment professionals visiting companies throughout the world as part of the fundamental research we undertake within the portfolio construction process, as well as being closer to our clients in more than 29 countries,” says Charles.

Over the last three years, William Blair has continued to see strong growth in AuM globally. The firm’s current AuM now stand at $64.3bn (as of 31 March 2016), an increase of 20% over the course of the period. 

The growth in AuM has come from a broad range of sources, with all of William Blair’s investment strategies recording net positive inflows during calendar year 2015.

Investor interest and the firm’s subsequent growth reflects long-term investment performance founded on a specialist focus on fundamentally driven active management and the use of disciplined, analytical research processes to identify opportunities and strive to generate outperformance while also protecting portfolios from downside exposure.

The firm says the investment performance is perhaps best illustrated by the performance of three of William Blair’s flagship equity strategies. Over a three-year market cycle its Global Leaders Fund, Emerging Markets Leaders Fund and (US) Small-Mid Cap Growth have beaten their benchmarks by 2.11%, 1.53% and 3.09% respectively (as of 31 March 2016).

In Charles’ view, the global asset management industry faces some significant challenges over the course of this year and beyond, due to market volatility and wider structural changes in the sector arising from such things as the rise of passive products, and digital disruption. 

“This ultimately reflects a maturing of the asset management industry and while there may be less scope for overall organic industry growth, there is certainly space for organisations such as William Blair to thrive.”

The greatest challenge to the industry arises from the ageing population and a collective shortfall in funding for retirement. “People are living longer, do not have sufficient savings and are faced with a lower return environment.

In addition, longevity risk – the risk that we outlive our assets – is increasingly shifting to the individual who is not equipped to deal with this risk effectively.

The economic fallout will likely be shared by us all,” says Charles. In his view, there is a strong case for saying that the asset management industry has a societal role to play with education, sustainable value add to the client for the price charged, and technological innovation to enhance the client’s experience and reduce costs in the system to help maximise real returns. 

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