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