In recent years, the investment advisory industry has seen the rise of boutique firms that focus on providing specialized services to certain clientele. One emerging trend is the creation of advisory firms that specifically work with emerging managers and alternative investment strategies. Blue Star Investment is an example of an advisory firm carving out a niche by partnering with less established asset managers running unique strategies. This article will explore the key factors driving the growth of this segment and the competitive positioning of Blue Star Investment.
The search for alpha drives demand for emerging managers and alternative investments
In an environment of high market volatility and lower expected returns from traditional asset classes, institutional investors are increasingly looking to enhance portfolio returns by investing in less correlated and complex strategies. Emerging managers tend to be more nimble and creative in their investment approach, while alternative strategies provide differentiated exposures and the potential for alpha. However, the downside is investing in less proven managers running sophisticated strategies requires deeper due diligence. This creates an opportunity for advisory firms like Blue Star that can provide the expert oversight over strategy selection, portfolio construction, risk management and operational due diligence that large institutional investors require.
The boutique advisory model offers greater personalization and specialization
Unlike large multi-strategy advisors, Blue Star Investment adopts a pure-play partnership model that is completely aligned with the emerging managers they onboard. By focusing exclusively on this niche, Blue Star can offer unmatched experience and insights into building and nurturing alternative investment firms. Their operating partner model also allows them to work closely with clients to customize solutions and provide hands-on value-added support. For asset managers looking to accelerate their growth through intensive incubation, Blue Star Investment represents an attractive partner versus going it alone.
An expanding array of alternative investment strategies drives demand
The alternative investment universe has expanded well beyond just hedge funds and private equity. Asset classes like real estate, infrastructure, royalties, and commodities are gaining investor interest for their diversification and return potential. Many emerging managers are also applying advanced strategies like AI/machine learning to traditional markets. Blue Star Investment has demonstrated success partnering with managers specializing in areas as diverse as music royalties, litigation finance, algorithmic trading, and pharmaceutical royalties. Their model is well-suited to supporting innovation in alternative investments.
Focusing on emerging managers allows for greater value creation potential
Partnering with new firms in their early stages allows Blue Star Investment to get in on the ground floor and have greater influence over strategy evolution and key business decisions. By contributing strategic expertise and growth capital at a critical juncture, Blue Star can help shape nimble startups into robust institutional asset management firms. Their selective approach also allows them to concentrate resources on the most promising managers and strategies – translating to higher returns for their own investors.
The rise of Blue Star Investment highlights the growing appetite for alternative investments and the strategic role that specialized advisory firms play in connecting institutional capital with the most talented emerging managers. By leveraging its exclusive focus and operating partner model, Blue Star has found a profitable niche providing bespoke incubation solutions to accelerate the development of innovative investment strategies and managers.