Boutique manager returns tanked again in January following a poor finish to 2007, taking more of the gloss off the investment industry's star performers.

According to Morningstar's database of boutique managers, no fund was able to produce positive returns in the first month of 2008.

The worst-performing non-geared boutique in January was SG Hiscock's SGH IC2E Fund.

The concentrated fund, which invests in listed companies with a sustainable competitive edge, slumped 15 per cent.

The best-performing funds were the retail and wholesale offerings from the Navra Blue Chip Australian Share Fund, which both lost 7.1 per cent. 

Morningstar head of research Anthony Serhan said when portfolio returns were being affected because of volatile markets, a healthy balance sheet and reasonable business plan took on greater significance for boutique operators.

"For anybody that has invested in the idea or the myth of a boutique, in that they are all powerful and can avoid market downturns, this is a good glass of cold water in the face," Serhan said.

However, he said education had helped investors understand the impact of periods of volatility on fund managers.

"As a market, advisers and investors will now wait longer where the underperformance is clearly as a result of what is happening in the markets...but at the other end of the scale, multi-managers are far more inclined to pull the trigger," he said.

Platypus Asset Management chief investment officer Don Williams said the only adjustment to its fund was increasing diversification by adding stocks to the portfolio.

"You can't really change the way you manage money so we're continuing to manage each position on its merits as we always do," Williams said. 

"Our relative numbers don't look any different to what they usually look like; obviously we'd like them to be better in absolute terms."