Cost considerations have led many investors to herd together in passive solutions. At BMO, we're firm believers in active management – an ethos that led us to launch our Universal MAP range, a suite of risk-targeted multi-asset solutions offering investors active management at a low price.
At a glance
- Price considerations have pushed passives to the fore.
- Many investors aren't tapping into the potential of active investing.
- Active benefits – grabbing opportunities and managing risks.
- Our BMO Universal MAP range means wider choice - active investing at a passive price point.
Opportunities for the active investor
When it comes to investing, we believe it pays to think actively. Why? Because there's scope to add value (or outperformance) by finding potential that isn't recognised nor reflected in valuation. Invest at that point then there's scope to reap greater rewards as the broader investment community recognises that potential. In a well-diversified portfolio, this 'active' value can be added at multiple levels – it may be by selecting individual companies or assessing the relative merits of geographies and asset classes.
There's a strong argument for active investment from a risk management perspective too. If an asset or market is looking expensive then doesn't it make sense to trim exposure, lock-in gains and allocate where valuations are more appealing? The merits of diversification are well-recognised, so does the passive replication of a heavily concentrated market really make sense? And, what if the economic outlook appears clouded? Perhaps a more defensive stance overall is required. In all these scenarios there is scope to manage risk exposure through active management.
Nevertheless, factors like regulatory change and a shift in the financial advice pricing model has moved passive investing firmly to the fore in many instances. As a result, some passive solutions have seen their assets swell to billions in size as thousands of individual investors herd together.
Active investing at a passive price point
At BMO, we don't think investors should miss out on active investing simply because they're in a 'cost constrained' mindset so just under three years ago we did something about it! Our BMO Universal MAP Range is a suite of actively managed risk-targeted multi-asset portfolios with an OCF capped at 0.29%. This price point brings it close to passive strategies and means that advisers and individuals seeking cost effective options now have a truly active proposition to choose from. The concept's been a popular one and the range now stands at over £500m and has seen it expand from three to six funds, including a dedicated income offering.
Active from the top and bottom
Our multi-asset team manage the portfolios. They make the strategic and tactical asset allocation decisions in terms of asset class and geographic positioning. To construct exposures to underlying asset classes they call on the skills of investment desks right across BMO. Here again the emphasis is on active investing – stock picking drives portfolio composition with factors like competitive position, management talent and valuation determining whether a company is held – not their weighting in a benchmark! We'd argue that our performance since launch underlines the merits of this approach, but we also believe that there's a strong case from a diversification perspective too.
Time to get active?
Prior to the emergence of COVID-19, markets had enjoyed an extended period of gains – an environment in which passive strategies have been able to deliver gains to investors. Looking forward though, the situation appears more uncertain. What will be the long-term impact on economies? Which businesses will survive in the future? And will heightened volatility remain a feature? Against this backdrop perhaps it makes sense to complement broad based market exposure with a more tactical and active approach – one that emphasises quality companies through selective investment? Our Universal MAP range provides such an option – its price point making it an ideal low-cost complement to passive solutions.
Actively engaged in responsible investment
Greater awareness together with regulatory change have brought consideration of environmental, social and governance (ESG) factors into focus for individuals and the investment and advice industries.
Our heritage in responsible investment spans back over 35 years to the launch of Europe's first ethically screened fund. Since then we've continued to develop a range of ESG solutions, including our recently launched Sustainable Universal MAP Funds. Like their counterparts, the funds are actively managed multi-asset funds but as the name suggests, sustainability sits to the fore.
Alongside an emphasis on sustainability related investments the funds seek to drive improvement through our active engagement activities. Our 19-strong Responsible Investment team has been engaging with investee companies for over 20 years and we use our role as a shareholder to challenge negative practices and drive improvements. Investors can read our 'ESG Profile and Impact Reports' to see the actions we've taken and the results we've achieved – the first of these reports will be available for the Sustainable Universal MAP range in 2021. In the meantime, why not look at our BMO Sustainable Universal MAP fund guide?
The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested. Screening out sectors or companies may result in less diversification and hence more volatility in investment values.