15 Jan 2021
Mark Parry, Director, Head of Strategic & Technical Sales
The asset management world is a fast changing one. That means themes, opportunities and asset classes moving into the spotlight and then out again. It means new approaches and perspectives gaining traction before either becoming accepted as mainstream or fading into the background once more. And it means personalities gaining prominence and followings from those that buy into the view that individual talent can sometimes be a guarantee of long-term investment success. Sometimes this may be the case but often stars fade, complex strategies fail to deliver on their promise, and ‘must have’ opportunities lose their sheen.
We’ve seen several examples in recent years. High profile absolute return strategies have become mired in complexity and struggled to produce the sort of returns they were touted as capable of. Assets like property have left investors caught in a liquidity limbo and similarly, thousands of people have seen their investments locked-up when an individual manager’s approach begins to struggle.
We’re not dismissing sophisticated strategies, alternative assets or individual talent, but we’re keen to argue that whilst all these can play a role in a broader portfolio there can be issues if they hold a dominant position. Better in our view is to maintain a non-complex core that offers scope to deliver on long-term investment objectives but structured to be resilient enough to weather challenges. This enables advisers to provide a suitable investment building block across a broad target market taking account of the FCA’s Product Intervention and Product Governance Source book (PROD) rules.
Having a core built on the solid foundations of proven investment fundamentals makes sense. Diversification across traditional asset classes can produce a robust portfolio foundation; for example, equities for their growth potential to counter the eroding impact of inflation and various types of fixed income assets to provide a steady source of yield.
Diversification results in a portfolio spread across asset types and geographies, and that means a sizable pool of opportunity but also a number of potential risks. With that in mind, surely it also makes sense for your ‘investment core’ to tap into a broader array of investment expertise, rather than a single individual.
With the right resource and capability in place there are numerous ways value can be added without deploying opaque techniques and complex instruments. Both strategic and tactical asset allocation can be used to protect capital and derive returns, whilst within the various asset classes, careful security selection can strike the right balance between managing risk and harnessing opportunity.
The concept of a well-diversified portfolio comprised of traditional assets that are liquid, carefully selected and adjusted isn’t new or particularly exciting but it’s one that holds constant against a fast moving and often uncertain backdrop. As a result, it’s an ethos that we believe is entirely aligned with what investors should be looking for in a core holding – a ‘sleep at night’ base to which they can add more esoteric or headline grabbing options should they choose.
It’s no surprise that components of Centralised Investment Propositions often share many of these characteristics. A real active element is commonly missing though – a function typically of the cost constraints such solutions operate under. This is where we believe our core multi-asset solution grabs attention. With ongoing charges figures (OCFs) from as little as 29 basis points capped, the BMO Universal MAP and BMO Sustainable Universal MAP ranges are priced at a point more commonly associated with passive investing. For that, investors can access risk-controlled portfolios investing globally, across equities and bonds, with asset allocation actively adjusted and underlying exposures managed by specialist teams. To find out more about how the BMO Universal MAP range can be used in your clients’ core investments, please contact the BMO sales support team.
Risk Disclaimer
Views and opinions expressed by individual authors do not necessarily represent those of BMO Global Asset Management.
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.