Welcome to the Morningstar series, "Ask the Expert." I'm Holly Black. With me in the studio
is Rob Burdett. He heads up the BMO Multi-Manager range.
Welcome to the studio. Thank you.
What is a multi-manager fund I think is our first question?
So, it's, if you like, a gift-wrapped solution for portfolio management, all-in-one fund
which has certain amount of diversification and some tax benefits as well.
So, why would someone choose a multi-manager fund and let you do that for them rather than
choosing their own funds? Either because they don't feel equipped to
do it themselves or maybe in our market there's largely financial advisers and they are concentrating
on the holistic advice piece and they want an outsourced solution. And there's very few
solutions that are genuine representations of their whole of market independence and
multi-manager is one of the ones that definitely is.
So, when you pick a multi-manager fund, presumably you still get options as to what you want
to focus in on? Yes. We offer 10 funds in two ranges, a risk-targeted
range and a more sort of free style more performance-led range as well.
So, choosing funds is really difficult because there are tens of thousands pretty much. So,
how do you whittle that down? I think what we don't do is the silo approach.
I think that is just making your job easier and cutting out some great potential investments.
So, I think you have to have an open mind, you have to have a range of idea generation
sources and you have to have a process and together then – so we do look at performance
filters, but we happily look at brand new funds as well which don't have any historic
track record. We have ways of doing that essentially because our process is qualitative. So, it's
about understanding what the fund manager is trying to achieve, checking how they are
going to do it and then deciding if that makes sense.
So, what does it got to take to get someone into the fund?
So, we receive their portfolios and analyse them what they are doing through software.
We send out questionnaires to get them to tell us what they do and how they do it. Some
questions we leave to the meeting. They are much better off face to face, things like
about team, how they work together and remuneration. You never get a good answer in writing. We're
looking for an element of interest there. So, then we obviously look at performance
if it's available. But this is all really due diligence, if you like. We can't – we
haven't made any decisions yet. So, the decisions are made on a scoring metrics. So, we use
– we score 16 qualitative decisions. So, that's when we prove to ourselves what we
like and dislike and if it's good enough for us.
And within the team does one of you have the power of veto or do you have to agree?
Yeah. So, myself and Gary are the co-heads of the business and we technically have to
– for regulatory reasons – have the right to veto. We've used it twice on partial additions
to existing holdings. So, we haven't been draconian. We've got a great team of 10 and
they are all involved in driving the portfolios. And once a fund is in the portfolio, how do
you review that and what would it take for it to get kicked out?
eah. So, we're looking at performance daily; we're looking at the portfolios monthly. We
look at our squads every six weeks. Every six months minimum we'll meet all of the managers.
So, there's like a schedule of meetings. And yeah, outside of that, we'll happily go to
conferences or we'll look at research, people like yourselves and there's a whole range
of things that we do to keep us busy. These are 10 people with 200 hundred years' experience
looking after about 100 holdings. And how many of those two hundred years are
yours? (Laughs)
So, something that I think is commonly said about multi-manager funds is they do tend
to be a bit more expensive than relative other options. What would you say to that?
I think – so, obviously, there's an obsession with costs at the moment from the regulator.
And I think, obviously, we need to operate value for money. Now, our charges come down
every year. The industry's charges come down. We heavily negotiate. It's a little known
fact that multi-managers are one of the few investors that can negotiate beyond super
clean private discounts for the investors' benefit. So, our ongoing charges are falling
every year. But it's about the value, so we're genuinely whole of market, most cheap products
or not. They often are two asset classes, that kind of thing. And we clearly think it
takes a lot of people to generate the research you need. We're partners in our own business.
All our savings are in our own funds. We wouldn't have 10 people if we didn't think it was necessary.
But it comes down the net performance at the end. And you've got to beat inflation and
you've got to, we think cover the cost of advice because that's the market we operate
in and historically, we've done both of those things.
Cool. Well, thank you so much for your time. Thank you.
And thanks for joining us.