Active investing – passive pricing

Launched in late 2017, the BMO Universal MAP Range brought something new to the funds marketplace – a suite of actively managed risk-targeted options that, with an Ongoing Charge Figure capped at 29 basis points, come at a price usually associated with passive investing.

In many ways, today's investors find themselves in an enviable position compared with that of their predecessors. There is greater choice in terms of asset types, product providers and individual funds. Investing is easier thanks to technology, meaning you can select, monitor and adjust your portfolio, often instantly. It's also increasingly cost-effective, with a real downward trend in the prices associated with investment. The latter is important as lower costs means less of a drag on returns and greater scope for achieving the outcomes investors are looking for.

Nonetheless, it remains the case that the value of investments can go down as well as up and investors may not get back the original amount invested.

Proven principles

Despite these changes, many of the principles associated with sensible investing are as applicable today as they have been in the past.

  • Diversification – spreading your portfolio across a range of investments
  • Long-term thinking – riding out shorter-term challenges and fluctuations
  • Consider valuation – remembering that the price you pay for an asset is a key determinant of its long-term potential.

The push to passive

It's unsurprising, therefore, that many of today's more popular investment options emphasise the benefits of diversification etc alongside the obvious advantages of lower costs. The latter has seen passive strategies proliferate, with individuals now able to access portfolios investing across a host of asset classes in a cost-effective manner through products like Exchange Traded Funds.

Active benefits

Whilst great news from a price perspective, those choosing to allocate to passively managed strategies are, by default, forgoing the potential benefits associated with active management. The advantages of active investing are multi-faceted in nature.

  • Asset allocation – making active adjustments to a portfolio's overall asset mix to reflect economic and market conditions. For example, if the economy is growing, a greater emphasis on equities may be sensible, whereas in more challenging conditions it may be prudent to favour the more resilient characteristics of fixed income. Exposure to individual countries can also be adjusted to reflect geographic differentials between regions and countries.
  • Tactical moves – alongside strategic asset allocation, it does make sense to think tactically too – taking advantage of more time sensitive opportunities and navigating near-term risks. Markets can move fast so a tactical overlay has scope to add real value.
  • Stock picking – the way components – such as individual equities or bonds – are selected can have a big impact as the difference between the winners and losers can be stark. In January 2018 for example, Carillion plc became the largest ever trading liquidation in the UK – bad news for its employees, customers and shareholders. If outperformance is the desired outcome, then doesn't it make sense to invest on the basis of detailed company analysis rather than passively mirroring the composition of a stock market index?
  • Risk management – any investment involves a degree of risk, so assessing and managing this is a big part of any active strategy. A market may be looking expensive, for example, so taking steps to protect the portfolio may be prudent.

BMO Universal MAP funds – an active solution at a passive price point

It's with these factors in mind that we developed the BMO Universal MAP Range, launching the funds in late 2017. We recognised the desire for a well-diversified portfolio building block at an attractive price but felt that cost considerations were leading individuals down a wholly passive route, which in turn meant forgoing the potential benefits of active management.

The range is built on firm foundations – we've been managing multi-asset portfolios for many years and used a proven multi-asset platform together with our other specialist capabilities to deliver a suite of actively managed funds at a price point typically associated with passive funds. For investors seeking attractive long-term returns and an investment aligned with their attitude to risk, the BMO Universal MAP funds offered a new and unique option.

A good start

It's worth noting that 2018 was an eventful and challenging year for markets and the team managed to add value through strategic asset allocation, tactical adjustments and bottom-up stock selection. Although the funds are little over a year old, we are pleased with how they have performed so far relative to their peers (the IA Volatility Managed).

Teamwork – the BMO Universal MAP funds are managed by the BMO Multi-Asset team. Based in London, Chicago and Toronto, the 20+ strong team manages over £30bn for institutions and individuals. As well as their own experience (an average of 21 years in the industry), the team draw on insights and expertise from across our other specialist capabilities.

BMO Universal MAP funds performance vs IA Volatility Managed

 BMO Universal MAP funds performance vs IA Volatility Managed

Past performance should not be seen as an indicator of future performance.

BMA Universal MAP Funds: performance in context

Performance against key indices and the IA Managed Volatility sector for comparative purposes

Rank Out of 115 funds Since
inception
Rank Out of 115 funds 2018 2017 2016 2015 2014
BMO Universal MAP Growth C Acc 1 5.29% 1 -0.49% - - - -
BMO Universal MAP
Balanced C Acc
2 4.52% 2 -0.67% - - - -
BMO Universal MAP
Cautious C Acc
3 3.79% 3 -0.85% - - - -
FTSE All World - 2.59% - -3.44% - - - -
FTSE All Share - -1.37% - -9.47% - - - -

Source: LIM, net of fees in sterling as at 31.01.2019. Past performance should not be seen as an indicator of future performance.

About BMO Global Asset Management

We’re a worldwide asset manager with over 20 offices in 14 countries. We are part of the BMO Financial Group that, with over 900 branches across Canada, is a household name. Having officially started doing business in November 1817, BMO was Canada’s first bank and its pioneering status is reflected in its official Canadian bank number, 001. In the 200+ years following its creation, BMO has grown to service the needs of over twelve million customers worldwide.

Did you know? BMO paid its first dividend in 1829 and hasn’t missed a payment since. At 190 years, this is the longest-running dividend payout for any Canadian company and means that cash has been returned to shareholders through major crises including World War I, the Great Depression, World War II and the 2008 financial crisis.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any products that may be mentioned.