Multi-Manager

Long-term thinking and the importance of people power

Why we value long-term thinking and people power.
March 2019

Gary Potter

Joint Head of Multi-Manager

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Risk Disclaimer

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.

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 companies that may be mentioned.

We live in a world of 24-hour news with information feeding instantly to screens that bombard us from walls, desks and our phones.

As a result, we’re increasingly connected to the wider world we live in – a trend that’s broadened our perspectives in some ways but can narrow them in others if we’re not careful. Nowhere is this more apparent than in the world of investment.

A tweet from the President can move the market in seconds, the speed and severity of some reactions making it hard to focus on anything other than the short term.

Avoid a narrowing perspective

We think this is a mistake – yes, be aware of near-term opportunities and risks, but never lose sight of the perspective that really matters – the long-term one. After all, as individuals we are rarely investing to achieve an outcome in the next days, weeks or even months. More sensibly, investments are made with a longer-term objective in mind, which might be an income in retirement or growing a pot of savings to help the kids through university, for example.

Risk Disclaimer

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.

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 companies that may be mentioned.

Getting the right mix

It’s the long-term goals our clients are aiming for, as well as tried and tested investment principles, that form the basis of how we manage our portfolios. Keeping these to the fore of our thinking helps us turn down the distraction of short-term noise.  Diversification is perhaps the most fundamental as spreading your portfolio across a host of different investments provides two key benefits:

  1. Tapping into a range of opportunities for income or growth.
  2. Tempering the impact of losses in any single area.

Of course, the types of investment – individual funds across a range of asset classes – we consider when building a portfolio are driven by what outcome we are seeking to achieve. There are a number of elements to these asset allocation decisions. Firstly, there are strategic considerations that are typically long-term in nature. For an income portfolio, for instance, there will be an emphasis on yield-generating investments through the likes of bond and equity income funds alongside some of the more esoteric options that exist today. Contrast the asset allocations of our Distribution and Boutique portfolios and you’ll see how different target outcomes lead to different asset mixes.

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Secondly come tactical moves, where active adjustments can be made to account for near-term opportunities and risks. Just now, with the UK economy under a cloud of uncertainty, perhaps trimming exposure for some time makes sense.
 

Get active

This leads us to another principle – that of active management and its potential to add real value over the long term. Such is our conviction here that we spend most of our time and effort picking the best active fund managers. After all, it’s been proven almost impossible to reliably predict broader asset moves from year to year, but we firmly believe that talented specialist managers can add value within their fields of expertise on a consistent basis.
 

People power

Interestingly, this brings us full circle. Our clients are people investing for a future outcome and we try never to lose sight of that. At the same time, the underlying managers we entrust our clients’ hard-earned savings to are also people – understanding what makes them tick, how they think and work forms a key element of our investment process. Again, long-termism is important because we want to invest early with managers building what we believe will be a long and impressive track record that benefits our clients.

“Don’t forget – economies are cyclical so neither booms nor busts last forever. Also, markets experience good times and bad times with disappointing periods often followed by strong recoveries. It’s important to keep a balanced perspective and think long-term.”

Gary Potter, Co-head, BMO Multi-Manager Team

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