Independent Management: fund analysists and business schools look for a consensus definition

Structurally, the consensus opinion understands independent management as “something that doesn’t belong to a larger financial group, such as an insurance company or bank,” describes Javier Sáenz de Cenzano, director of Fund Analysis at Morningstar in Spain and Italy. The direct consequence of this implication is that the boutique -a synonym frequently used in the asset management industry to refer to independent managers- “is property of its shareholders and therefore, doesn’t entail a captive distribution network of its investment funds,” points out Ana Gúzman, deputy director of the Masters in Portfolio Management at the IEB.

Since they do not have their own network, “the manager would have to take precedence over the quality of their management over the associated costs of production, with the goal of capturing the interest of clients,” defends Gúzman.

The concept of independent management could also entail a significance of the management of the author. This is, a firm of asset management in which, “the manager -or team of managers- is autonomous from the owners of the company,” understands Manuel Romera, director of the Financial Sector of the IE Business School.

On occasion, the independent managers can also be property of large groups, despite not being financial. Examples in Spain are Bestinver, which belongs to the infrastructure and renewable energy company, Acciona, and Fonditel, which belongs to the telecommunication company, Telefónica.

For Cenzano, in the case that the firm belongs to a non-financial group, independent means “not influenced by external policies decided by the parent company,” which is to say, “that the manager is in the position to decide all relevant aspects in regards to the development of their products, pricing and fees, personal contracts and wages, and renumeration structures or definition of distribution channels and marketing activities,” among others. ¿Independent manager, or independent management?

Beyond the shareholding of the company, it becomes vitally important to go down to the field and analyze what management style is followed in the day to day of the products. “Independent management, which can be associated with an independent manager, or not, is understood as something which, follows the investment guidelines, and is not as tight to the reference indices of the markets, but the managers make more conviction bets based on different investment styles,” says Gúzman. This should generate profits above the benchmark, and the average of the category of the vehicle in question and guarantee an efficient control of risk, says Romera.

The relationship between the manager and its parent group may decide even more than pure business ownership when defining what independent management is and what it is not. “There are many levels of linking. In some cases, the asset management unit operates almost fully autonomous, while other units depend heavily on the group's decisions,” Cenzano puts in context.