Boutique managers have been approaching institutional fund manager Challenger about potential partnership opportunities, according to Challenger head of distribution Matt Gaden.

"There have been a number of boutiques that have approached us indicating that they would like us to back them as a business," Gaden said as part of a speakers' panel at the FPA annual conference in Melbourne last week. 

Challenger's boutique business includes partnerships with six boutique fund managers: Kapstream, Ardea, 5 Oceans, WaveStone, Kinetic and Greencape.

"Having a sustainable business model is crucial for boutique fund managers if they are to survive a market cycle," Gaden said.

"In 2002 we had the age of the boutique fund manager with many small firms setting up. However, many boutique fund managers may not have the sustainable business model to allow them to survive a full cycle."

Bennelong Funds Management chief executive Jarrod Brown, who was speaking on the same panel, said business sustainability was the crucial issue for investors.

"We are finding that people have really stepped up their due diligence on us before awarding us with mandates," Brown said.

"We recently won a mandate from a large client. Their due diligence process took up to eight months. The head of the business, a former asset consultant, did not want to invest in boutiques, however, his team recommended us because they knew that we had a sustainable business model."

Gaden's comments follow similar remarks made by NabInvest and Ascalon. Both firms are boutique incubators, operating on a model that is consistent with Challenger's partnership program.

"Because of who we are, we get approached on every opportunity," MLC and NAB Wealth asset management executive Garry Mulcahy said in July.

Similarly, Ascalon chief executive Andrew Landman said his firm was often approached by boutique managers looking to garner support for their businesses.