Investment banking boutiques bounce back into fashion Investment

The smaller players say their outgoings are much more manageable, enabling them to make money from a thinner margin. They have also benefited from being able to pick up big hitters from the massive shake-out of bankers from the major institutions. They hope to be able to hang on to these people when markets improve because they have been given a stake in their businesses through the partnership model of most of the boutiques.

They also argue that the boutique model genuinely responds to the heightened desire for transparency and independence of advice prompted by embarrassing revelations about the disingenuous research handed out by investment banks during the equities boom of the late 1990s.

While some are purely corporate finance boutiques, others, such as Altium and Bridgewell, have decided to go down the path of also offering equities research. Consequently they, along with the bigger banks, will have to tackle the question unbundling research fees from their charges for equities trading and advice. The Financial Services Authority has made clear it wants to see this happen in the City just as it is happening on Wall Street.

The boutiques argue unbundling should be easier for them than for their larger rivals, because they will offer specialist research that clients will be more willing to pay for than the analysts' notes from larger banks that may not look very different from each other.

While plenty of boutiques will probably fold in the coming years, some look like a much more permanent fixture, such as Greenhill & Co, set up in 1996 by Wall Street veteran Robert Greenhill, and already one of the most respected advisers in the City.

John Wilford, chief executive of British Linen Advisers, the remnants of the old British Linen which bought itself out from Bank of Scotland, said: "Ten years ago there were a number of very strong independent banks, such as Schroders and Warburgs. They are not independent any more and there is a real opportunity to create a number of firms of substance. In a few years time I think there will be two or three firms that are being formed now which will be in the top 10 of the M&A league table."

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