THE BOUTIQUE ADVANTAGE. INVESTMENTs

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1 THE BOUTIQUE ADVANTAGE INVESTMENT Managers Managing INVESTMENTs

2 Collective Strength Robust Infrastructure Support Institutional Resources Tenure Accountability Each boutique has its own investment philosophy, process and focus. This specialization is designed to best service client needs. Ashi Parikh, Chief Executive Officer and Chief Investment Officer, RidgeWorth Investments WHY Ridgeworth WHY Ridgeworth Focused Individual Insight Close Partnership Strategic Agile Flexible Boutique Model THE BOUTIQUE ADVANTAGE A recent survey highlights advisors thoughts and concerns about these specialized investment managers. Just over half of advisors (51%) that use actively managed mutual funds offer funds run by boutique investment managers, according to a survey of nearly 400 advisors conducted by RidgeWorth Investments and WealthManagement.com. Advisors using boutiques favor the agility these more targeted firms can provide, as well as their ability to provide specialized or unique investment strategies. The term boutique describes a relatively wide range of firms. Advisors and other investors considering boutique managers may benefit from an understanding of the differences among these firms, from the types of boutique models the firms employ to the variety of investment strategies they use. Performing the due diligence necessary to understand how a particular boutique invests can help the advisor ensure that its fund plays the appropriate role in investors larger portfolios. Each boutique has its own investment philosophy, process and focus, says Ashi Parikh, Chief Executive Officer and Chief Investment Officer at RidgeWorth Investments, a network of five boutique investment management firms. This specialization is designed to best service client needs. Inside the boutique model There is no one-size-fits-all definition for boutiques. Some may have just a few employees and less than $1 billion in assets, while others may have a deep roster of managers and analysts managing more than $10 billion. Although they can vary significantly, these firms generally share several common characteristics. THE BOUTIQUE ADVANTAGE 2

3 When there s an opportunity, we can be flexible and nimble. We re able to analyze the situation and determine whether a security looks interesting or whether it s too expensive and then move very quickly. Ron Schwartz, Managing Director, Seix Investment Advisors Streamlined management. Boutique managers can often be more agile because they are able to make quick decisions in response to market conditions, without being restrained by bureaucracies that may slow down such as decisions and implementation at larger firms. Boutiques size and agility are key reasons investors seek them out. Some 80% of survey respondents see boutique firms as highly agile, compared to just 35% for large asset management firms. Moreover, 56% of advisors using boutiques consider agility to be an important criterion when selecting an asset management firm. A defined niche. Boutique firms often have specialized areas of expertise. A boutique may employ a particular style, such as deep value or aggressive growth investing, or invest in a specific area of the financial markets, such as small-cap equities or emerging markets debt. That focus may help managers exploit market inefficiencies and take advantage of opportunities that more broad-based investors might miss. Advisors recognize specialization as an important characteristic of boutiques, with 40% of survey respondents listing specialized or niche strategy as their first or second choice to describe these firms. Ron Schwartz, Managing Director at Seix Investment Advisors LLC, a boutique in RidgeWorth s network, notes that a dedicated focus on the municipal sector can help when responding to market shifts. There are many inefficiencies in the municipal market, but those inefficiencies don t last long, he says. When there s an opportunity, we can be flexible and nimble. We re able to analyze the situation and determine whether a security looks interesting or whether it s too expensive and then move very quickly. A disciplined strategy. Boutiques also tend to approach their areas of expertise with disciplined and consistent investment strategies, the result of the relatively long tenures of managers at many boutique firms. Key personnel often have strong incentives to remain with their firms, including ownership stakes and other forms of equity. Advisors who use boutiques are most likely to name manager tenure as the top criterion for their investment needs. Low staff turnover may enable a boutique firm to maintain its investment strategy over long periods of time. Our consistency of management has helped us lead to a more predictable track record of performance, says Mills Riddick, Chief Investment Officer, Ceredex Value Advisors. Boutique models: Independent, subsidiary and multi-boutique There are several variations on the boutique model a boutique firm may be independent, or it may be a subsidiary of a larger investment or financial services firm. A boutique may also be part of what s known as a multi-boutique model, in which a network of several boutiques is under the auspices of a parent company. Boutiques operating under the multi-boutique model offer a blend of independence and institutional support. They receive resources from the parent company, but remain independent in their investment and portfolio management decisions. RidgeWorth Investments provides one example of a multiboutique model. RidgeWorth, which has approximately $49 billion in total assets under management, is a holding INVESTMENT Managers All survey results sourced to Asset Manager Preference Study, RidgeWorth/WealthManagement.com, July Managing INVESTMENTs 3

4 Advisors Weigh In Which aspects best describe a boutique firm? Specialized/niche strategy Unique investment strategy Flexibility Entrepreneurial culture Manage small number of assets Base: All respondents (n=384) 44% 44% 51% 58% 65% company with a network of five specialized investment management firms under its umbrella. RidgeWorth handles administrative work such as information technology, trading, operations and marketing, so its boutique managers can devote their time and resources to managing investments. The holding company manages the business. This allows the portfolio managers to focus exclusively on managing investments, says Parikh. Investors can benefit from the managers individual insights, the collective strength of the network and its robust infrastructure support. Choosing a Boutique Manager Selecting a boutique investment firm generally requires more due diligence than choosing a larger investment manager. Furthermore, the many variations among boutiques make it critical for advisors to investigate any firm carefully before investing. An advisor contemplating using a boutique might first consider whether its firm has the resources and expertise to handle the due diligence process, as well as ongoing oversight of the relationship. If the answer is yes, the next step is to begin the evaluation process. Advisors seeking to add boutique management to invest in a particular asset class or sector of the market can greatly narrow the search by focusing only on firms that specialize in those areas. Once a short list of prospective firms has been assembled, advisors can review each firm s organizational structure. Factors to consider include the concentration or dispersion of decision-making authority. Some boutiques, particularly smaller ones, may have just one or two people responsible for the bulk of investment decisions, while others may have a more teamoriented approach. In the event that one portfolio manager makes the decisions, advisors may wish to evaluate the firm s succession plan. Also consider how the firm handles communications with investors. Respondents to the RidgeWorth/WealthManagement.com survey noted that boutiques often offer easy access to portfolio managers and other key investment personnel. However, several respondents noted that the THE BOUTIQUE ADVANTAGE 4

5 Advisors Weigh In What types of companies do you use for actively managed mutual funds? 80% 70% 51% Base: All respondents (N = 381) Multiple responses allowed. Large asset management firm Medium sized asset management firm Boutique asset management firm How many different mutual fund companies do you use? More than 5 62% Base: All respondents (N = 381) 4 or 5 24% 2 or 3 13% 1 1% lack of infrastructure at some standalone boutiques can make it difficult to have a dependable line of communication with these firms. In the multiboutique model, the holding company can deliver institutional-quality communication and service, says Parikh. Most survey respondents cited tenure as one of the most important things they consider in selecting an asset manager. Advisors can ask prospective firms about tenures among their staff, including portfolio managers, analysts, researchers and support staff. Tenure is extremely important, says Don Wordell, Managing Director, Ceredex Value Advisors. Having continuity among your staff gives you a better chance of creating a repeatable track record. Advisors also can try to evaluate the boutique s culture, including the process for making investment decisions. Management teams generally share a common philosophy, but advisors may seek to understand whether the team is open to opinions that challenge the portfolio manager s investment ideas. Mills Riddick, Chief Investment Officer, Ceredex Value Advisors, says this kind of debate can be a benefit of the boutique model. One of the biggest advantages of the boutique environment is that you can have a focused team, he says. Our staff is always together, always talking about ideas and communicating what we re seeing in the markets, and always collaborating on investment decisions. For many advisors, the boutique model offers an attractive alternative to large investment firms. The sharp focus on a particular slice of the financial markets, coupled with disciplined investment strategies bred from long tenure and close collaboration, may help advisors provide their clients with strong investment performance. To capture this opportunity, advisors should consider models that offer both the agility and focus of boutiques, and the institutional-quality support of a larger firm. Some advisors may find that the multi-boutique model offers the best of both worlds. n INVESTMENT Managers All survey results sourced to Asset Manager Preference Study, RidgeWorth/WealthManagement.com, July Managing INVESTMENTs 5

6 About RidgeWorth Investments RidgeWorth is a money management holding company with five style-specific institutional investment management boutiques. Investment adviser registered with the SEC since 1985 Over $48.7 billion in assets under management * Five boutiques, located in four different locations, with 17 primary equity and fixed-income investment styles Well-defined, proven approaches and unwavering commitment to exceptional performance 79 investment professionals ** Portfolio managers average 26 years of investment experience ** RidgeWorth has a more than two-decade legacy of delivering investment solutions that help clients achieve success. RidgeWorth s mission is to earn and maintain the confidence of investors. THE BOUTIQUE ADVANTAGE 6 *As of 06/30/14. Assets under management includes sub advisory relationships and separate accounts. **As of 06/30/14.

7 The assertions contained herein are based on RidgeWorth s opinion. This information is general and educational in nature and is not intended to be authoritative. All information contained herein is believed to be correct, but accuracy cannot be guaranteed. This information is based on information available at the time, and is subject to change. It is not intended to be, and should not be construed as, investment advice. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision. Past performance is not indicative of future results. An investor should consider a fund s investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the RidgeWorth Funds can be found in a fund s prospectus. To obtain a prospectus, please call or visit Please read the prospectus carefully before investing Ceredex Value Advisors LLC, Certium Asset Management LLC, Seix Investment Advisors LLC, Silvant Capital Management LLC and Zevenbergen Capital Investments LLC are registered investment advisers with the SEC and members of the RidgeWorth Capital Management LLC network of investment firms RidgeWorth Investments. RidgeWorth Investments is the trade name for RidgeWorth Capital Management LLC, an investment adviser registered with the SEC and the adviser to the RidgeWorth Funds. RidgeWorth Funds are distributed by RidgeWorth Distributors LLC, which is not affiliated with the adviser. Collective Strength Individual Insight is a federally registered service mark of RidgeWorth Investments. For a copy of the full survey results, please contact the RidgeWorth sales team at INVESTMENT Managers All survey results sourced to Asset Manager Preference Study, RidgeWorth/WealthManagement.com, July Managing INVESTMENTs 7

8 To learn more visit or call RFWP-BA-0814