BMO UNIVERSAL MAP BALANCED: Funds at one third of normal cost
BMO UNIVERSAL CARD BALANCED FUND: active funds at one-third of normal cost
Canadian-based BMO Financial has more than 12 million clients around the world, providing a range of banking and wealth management services.
Its tentacles extend to the United Kingdom where it leads a successful investment operation. Among the many funds it manages is F&C, the country’s oldest investment trust, which was established in 1868 and, more recently, has generated 50 consecutive years of dividend growth for shareholders.
The manager of F&C is Paul Niven who over the past three years has also overseen the successful creation of a range of low cost funds actively managed by BMO. Labeled Universal MAP (Multi-Asset Portfolio), these 11 funds have collectively passed the billion pound mark.
Niven says that investment funds fill a “gap” in the market – between low-cost passive funds (which typically replicate the performance of a specific stock index) and higher-cost active funds managed by investment managers. portfolio that make selection decisions hoping for stellar returns.
Six of the funds have an annual fee of 0.29 percent, with the other five “sustainable” funds having slightly higher fees of 0.39 percent.
To put these costs in context, most actively managed investment funds have total annual fees greater than one percent. “The funds have widespread appeal,” says Niven. “They are attractive to cost-conscious investors, are a basic investment proposition for many financial advisers, and are also popular in the defined contribution pension market where many investors have to manage their own plans.”
The funds have risks ranging from “defensive” to “adventurous” and all have targeted returns. So in the case of Universal MAP Balanced, the most popular fund, the target is a five-year average annual return of inflation plus three percent – inflation being measured by the price index at the consumption.
Although the fund is only three and a half years old, it has so far delivered a respectable 31% return, comfortably outperforming the FTSE All-Share index over the same time frame. The 11 funds invest in a mix of stocks, bonds and cash – there are no holdings in unlisted companies, real estate or alternative assets such as private equity. The more cautious the fund, the greater the proportion of assets in bonds and cash. In the case of Balanced, the current asset allocation is 62.5% (stocks), 35.8% (bonds) and 1.7% (cash).
Universal MAP funds are managed by a multi-asset team of 15 people based in London and Edinburgh.
The “strategic” asset allocation of each fund is reviewed every quarter, which makes it possible to adapt to take advantage of any short-term investment opportunities. Individual stock selections are made by BMO’s investment teams who specialize in specific geographies and, according to Niven, “are expected to outperform.”
The balanced fund has typically had equity exposure in the range of 50 percent. The current higher exposure, according to Niven, reflects BMO’s “confidence” in stocks. “They’re not cheap,” he adds, “but they’re more attractive than other assets.
Although the £ 355million balanced fund is the largest in the Universal MAP lineup, Niven says sustainable fund offerings are on the ‘rise’. There is also an income fund that strives to reward investors with an annual income equivalent to at least four percent.
The stock code for Universal MAP Balanced is BF99W06.