Challenger Financial Services Group's boutique fund managers continue their rapid expansion after more than doubling their combined funds under management (FUM) in the first half of the 2010 financial year.

Boutique FUM increased by $2.1 billion to just over $4 billion for the six months to 31 December 2009, according to Challenger chief executive Dominic Stevens.

"Our fund flows are accelerating and the flows into our boutique partnership range have been particularly pleasing," he said.

Challenger's total FUM, including funds managed by internal teams, through external alliances, boutique partnerships and specialised funds, came in at $19.2 billion at 31 December 2009, up 14.3 per cent from $16.8 billion at the end of 2008.

Challenger's boutique funds have gained a significantly larger slice of the overall FUM pie and currently represent 16 per cent of total funds.

"We believe firmly in the alignment that boutiques provide to shareholders, to investment professionals and to the end investor," Stevens said.

"We remain positive about the future growth in that sector."

Challenger has stakes in boutique managers Ardea Investment Management, Five Oceans Asset Management, Greencape Capital, Kapstream Capital, Kinetic Investment Partners and Wavestone Capital.

On Monday the group reported an overall net profit of $116 million for the six-month period, an increase of 9 per cent from the same period in 2008.

Stevens did not expect to see an adverse effect from any potential regulatory changes.
 
"Although Challenger is not relying on any particular outcome from the number of relevant reviews going on, we are actively looking at our product suite, focussing on how we can make our products more relevant in a post Cooper-Henry-Ripoll environment," he said.

"We do believe, however, unlike many of our peers, any changes will be neutral to positive to Challenger," Stevens said.