As BMO GAM’s incoming Chief Investment Officer, Sadiq S. Adatia offers a unique look at where the company is now after the sale of its U.S. and EMEA divisions, and where it’s headed in the months ahead.
An Evolution, Not a Revolution
During my first few months as Chief Investment Officer, the most common question from both internal and external stakeholders has been, “What sort of changes should we expect?” Everyone wants to know if day-to-day operations will be impacted by the sale of BMO Global Asset Management’s (BMO GAM) overseas divisions and, if so, to what extent. In working with the teams, I believe we can confidently say: our business will be largely the same.
Our main philosophy, which I define as long-term investing combined with a willingness to act on short-term dislocations, will remain at the heart of how we manage money. Our core strategies will continue unabated. And our global reach, which gives clients access to the best risk-return funds in the world, will stay entrenched across the product suite.
Leadership Based on Experience
Moving forward, we will devote more time, attention and effort to leveraging tactical opportunities in the market – both to add and reduce risk. To me this is a key part of our risk management process. The past couple of years has shown us that the economic environment can turn quickly and create fleeting moments to both capture returns and protect portfolios. So, in keeping with those lessons, we will increase collaboration amongst the teams, build better models, and be quicker in our adjustments. Even our strategic asset allocation models are going through a review and will be reviewed annually thereafter.
Adding to this, you can expect to see a major focus on risk management, which should come as no surprise given my previous experiences. I started off my career as a pension consultant examining companies’ balance sheets, particularly their liabilities. This helped me gain a profound understanding of the impact of interest rates and yields on liabilities. It is also where I understood the true importance of risk management.
Next, I moved on to work as an investment consultant, focusing on strategic asset allocation, manager selection/oversight and risk management. Learning that our attention should be geared toward the long term was extremely important. I then switched to an asset manager overseeing portfolios, including multi-asset portfolios. During that time, I came to understand that long-term fundamentals frequently diverge from the current market drivers, and that creates great opportunities. So, I started to incorporate tactical asset allocation and derivatives to help be more agile in those situations.
Then my previous employer came knocking with an incredible offer to build out a new asset management arm within their wealth operations, from scratch. I was given carte blanche to implement my own vision, a task for which I already had the necessary tools – an institutional background, a refined risk lens and a client focus that engendered trust.
All of these experiences brought me to BMO GAM. It’s a much bigger ship, with an incredible history of investment performance, innovation and client-focus. So, at the moment, my attention is on refining processes, adding additional tools, and providing insights to boost collaboration and unlock the full creative power of our team.
Our Four Areas of Focus
Active. I actually define active in two ways. The first is quite traditional: active in the sense of buying stocks and bonds, which is something we have always done and will continue to do. The other part is active in terms of asset mix and tactical asset allocation. As mentioned earlier, this aspect of our approach will be enhanced and expanded over time.
Passive. When it comes to innovative index strategies, it’s important to work with a trusted manager that knows what they’re doing. Our ETFs team has an enormous footprint in traditional broad beta exposures, and have pioneered some of the most innovative strategies in the market, from Covered Calls to Clean Energy, Genomics and Autonomous Tech. We also have a deep reservoir of educational materials for institutional investors to familiarize themselves with the methodologies, benefits and use cases of ETFs.
Alternatives. This is an area that BMO GAM has been talking about for many years, and is a very important part of what we think should be central to portfolios. Whether you built an exposure from scratch or are using a plug-and-play solution, we want to demonstrate our strength and optionality in the space. It’s an open secret that the market is underinvested in alts, so going forward we will explore ways to help the asset class grow its total AUM.
ESG. Responsible investing has been a cornerstone of our investment values and philosophy for decades now. We already have the strategies in place, as well as ESG integration across all our lineup. None of this has changed post-sale; we intend to continue our involvement on key issues, such as climate change, diversity and food security, all while we keep voting impactfully on behalf of our clients.
What’s Next for BMO GAM
While the individual components of BMO GAM will remain very much the same, we hope to increase the sum of their parts. One way to do this is by opening lines of communication between asset classes and portfolio managers, to better identify risks and opportunities in the market.
Within our multi-asset team, for example, I’ve already instituted two formal meetings that occur on a weekly basis. Our Tuesday session is a forum to discuss economic data and any trends that are starting to emerge which our led by our strategist. The other meeting, on Thursdays, is where we typically discuss holdings that are already in the portfolio, as well as compelling trade ideas, rebalancing opportunities and sector/geographical weightings.
On a monthly basis, we will gather members of the investment team – including our colleagues from BMO Private Bank (both Canada and the U.S.) and Nesbitt Burns – to share macro perspectives on the economy, politics and market fundamentals. Meanwhile, the quarterly process will go even deeper, with us bringing in our BMO economists, technical analysts and speakers from the buy/sell to complement what we do more frequently.
These collaborations will allow for a wider view of the economy and markets, which should result in better portfolio decisions, greater focus on risk management and unleashing the true strength of BMO GAM. Stay tuned for updates from me in the coming months as we continue to navigate the road ahead.
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