Multi-managerJul 4 2016

‘Our buying power continues to increase’

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In an environment of low growth, low interest rates and macroeconomic uncertainty, it is little wonder that, at a time when outsourcing has become more common, risk-targeted offerings are also becoming more popular.

Combining this with a multi-manager and fund of funds approach, the MyFolio offering from Standard Life Investments (SLI) has attracted more than £8bn in assets since its launch in September 2010.

For Bambos Hambi, head of fund of funds management, and James Millard, investment director at SLI, the MyFolio proposition to advisers and clients focuses on a “repeatable and robust” process, and provides consistency and transparency when it comes to investments.

After leaving Gartmore, Mr Hambi explains he was “looking for the right opportunity” when he was contacted by SLI to become a non-executive director of the governance committee overseeing MyFolio and a guided architecture range.

“I took that role and got to understand MyFolio in detail. The person SLI had lined up to run MyFolio decided at the last minute it wasn’t going to work, so I threw my hat into the ring. It was something I was very experienced with, in terms of multi-manager and fund of funds, and I thought it was an exciting opportunity.

“It was something new, not many people were doing risk-targeted funds and, with the RDR coming up, I thought working for SLI – with the right culture and a big resource in place – would be exactly the right thing for me. Now, five and a half years later, we’ve got £8.4bn in assets under management.”

Mr Millard is a newer addition, joining in 2014 to help run the team managing the MyFolio suite.

“As we’ve grown, the demands on my time have got bigger” explains Mr Hambi. “I needed to get someone senior in to help me drive the business. I’d met James in the past and felt he would be the right person to add to the team – it has worked really well.”

CV - Bambos Hambi

2011 – present

Head of fund of funds management, SLI

2008 – 2011

Multi-manager consultant and independent fund expert

2003 – 2008

Partner, head of multi-manager and fund manager, Gartmore Investment Management

2003

Head of multi-manager and fund manager, Insight Investment Management

2001 – 2003

Director, head of multi-manager and fund manager, Rothschild Asset Management

1997 – 2001

Fund manager, Friends Ivory & Sime

1987 – 1997

Head of collective investments, Quilter & Co

1978 – 1987

Head of investment performance measurement, Legal & General

Joining from Old Mutual Wealth, Mr Millard helps run the team, manages several portfolios and is in charge of leading the commercial relationships with the underlying fund groups to ensure the best terms for MyFolio clients.

While there are 11 members in the dedicated MyFolio team that focuses on funds, Mr Millard points out they are supported by both SLI and the life and pensions parent company.

“One of the attractions was joining Bambos and the team but also being supported by the wider business. There are 60 people involved in running MyFolio overall – from strategic and tactical asset allocation to fund selection and portfolio construction, as well as the blending that we do on a day-to-day basis.”

The MyFolio proposition developed from the idea that, while the asset management industry was good at making money when markets went up, it is not so good at protecting on the downside. This evolved into a risk-targeted approach.

Mr Hambi states, pre-RDR, the main issues included advisers looking to outsource, an increased focus on costs and improving qualifications. He adds: “As a company, we felt that outsourcing was going to be a major growth area. When an adviser sits down with the client, they spend a lot of time understanding their risk profile.

“We’ve clearly labelled [the funds] from risk one to risk five, low risk to high risk, and our low-risk funds will always be low risk and the high-risk funds will always be high risk. [This] takes away the worry that they may be in the wrong product as long as they understand the risk profiles. That is a big part of our success.”

Mr Millard continues: “These risk-targeted solutions are designed for the client to hold for the very long term. We want them to understand what is going on in the portfolios so they can maintain their investments and add to them in the accumulation phase of their investing career – and into the decumulation phase, as well.”

The MyFolio proposition encompasses three multi-asset, risk-targeted ranges: the Market funds, which are invested in passive underlying funds; the Managed funds, which invest largely in SLI in-house products; and the Multi-Manager funds, which adopt a third-party, multi-manager approach.

CV - James Millard

2014 – present

Investment director, SLI

Jan – Dec 2013

Director of investments, Old Mutual Wealth

Apr – Dec 2012

Director of investments, Old Mutual Global Investors

2002 – 2012

Various roles, latterly chief investment officer, Skandia Investment Group

1998 – 2002

Investment analyst, Orbis Investment Advisory

1994 – 1998

Chartered accountant, KPMG

However, all three adopt the same four-step process of strategic asset allocation, tactical asset allocation, fund selection and rebalancing to ensure risk targets are maintained.

Since launch, the proposition has seen the number of asset classes in which it invests increase from 14 to 18, as the market environment and the business evolved.

“We’ve been well diversified across those asset classes and the tactical asset-allocation bets that we’ve put around those have been adding value, but haven’t been very large heroic bets that have predicated success on the outcome of a particular market. Diversification and being able to ride out volatile market conditions are key elements within the strategy of these funds,” says Mr Millard.

Having the backing of the wider Standard Life group is also key to MyFolio’s success and forms part of SLI’s future plans, with the main opportunity currently centring around Standard Life’s growing advisory business 1825.

“We are [part of] its central investment proposition; MyFolio is at the bottom end, but the managed portfolio service (MPS) [is also] involved, which is managed by James,” says Mr Hambi.

“[The MPS] is a bespoke set of managed portfolios with risk levels of one to five. A familiar philosophy and process is applied to them but they are available on an exclusive basis to clients of the 1825 business. [They are] managed on the Standard Life platform by me and the fund solutions team to provide a bespoke service offering, complemented at the top end by Standard Life Wealth’s discretionary offerings, as well as its target return portfolios,” explains Mr Millard.

Mr Hambi points out all of the MyFolio offerings follow the aforementioned four-step process “that works well, is repeatable and is robust – and that is very important. It means we can replicate it in other areas, 1825 being a good example”.

Not even six years in, the business has already made its mark – but this quick success has not been without its challenges, with Mr Hambi noting that in the first year the proposition caught people’s attention quickly.

“Originally, there were three people in the team, we were getting lots of assets and still trying to make sure we had the management information available to show we were delivering what we expected. The challenge was how quickly the success came [as] we were still building the team and infrastructure around it. But we managed to grow the team quickly to make sure we were back on the front foot. Now we’re a team of 11 and remain on the front foot,” he says.

“We’re going to grow substantially, and we’ve got to make sure we do it properly resourced for the future. It was one of the key reasons for bringing James in 18 months ago – ahead of any new launches and ahead of any new products – to make sure we were ahead of the curve.”

While assets are likely to rise further, the two men dismiss ideas of any capacity or liquidity issues.

“Our buying power continues to increase and [with it] the ability for us to get better terms for our customers. As assets have grown, it also means we’re able to seed strategies and be early investors into managers where we have significant confidence in their capabilities and we can include them in the portfolios from day one,” says Mr Millard.

“Because we’ve got the choice of ranges, there are certainly no capacity issues in terms of managing the assets. We’ve got relatively small position sizes in some managers and where we’ve got material positions they’re in very liquid markets. We make sure we’re not invested in esoteric strategies that the underlying customers wouldn’t understand, and that can also come with some inherent liquidity issues.”