BMO AM’s Rob Thorpe on focusing the firm following the F&C takeover

When Rob Thorpe joined F&C Asset Management as head of UK Intermediary at the end of 2013 he was struck by the “noise” overwhelming the firm.

Despite acquiring respected multi-manager boutique Thames River in 2011, Thorpe says F&C – one of the big fund groups of the noughties – was seen by advisers to have “lost its way”.

Activist investor Sherborne Investors, headed by Ed Bramson, had overhauled F&C after taking over the company in 2011, before selling its stake in 2013.

“Bramson took cost out of the business to create shareholder value, which was disruptive,” Thorpe says. “The Thames River acquisition was good, but it was also disruptive. There was a lot of noise around F&C that was disguising the product.

“You can forget the brand, forget distribution, it’s all about the product. You could have the brand and the distribution, but it’s no good without a good product. F&C had a good product but it wasn’t reaching the market.”

In 2014, BMO Financial Group – part of the Bank of Montreal – acquired F&C. The combination of this acquisition and the restructuring of the sales team went a long way towards removing the noise, Thorpe says.

“When I joined, the UK retail and wholesale sales team were a disparate bunch of very good individuals operating independently around the UK. There was no defined focus. We now have three sales regions, the North, South and Midlands, as well as a separate team looking after strategic partners. Every team is responsible for every client in the region.

“You can’t have two sales team; it’s inefficient. I think we are one of the first to have a combined sales team but a number of groups are heading that way. The wholesale team is based in London and works closely with the regional sales teams. If people don’t care who gets the credit it is amazing what can they can achieve. We are all aiming for one objective.”

Net sales are “a measure of success”, Thorpe says. In 2013 the firm didn’t even rank in the top 25 for net sales in the retail space. By the last quarter of 2016 they had made it into the top 10.

“The product was always good and we can see the progress in sales. We are incredibly ambitious as a business and we can see we are making progress.”

The BMO takeover was mutually beneficial, Thorpe says. The gain for F&C was stability for the delisted company and access to additional products, while BMO benefited from F&C’s distribution capabilities. BMO already had a UK offering in the form of global equities firm Pyrford International and emerging markets specialist LGM Investments.

In July 2015 F&C Asset Management was rebranded to BMO Global Asset Management, although no changes were made to the names of the F&C funds. However, Thorpe admits it is “an area we are looking at”.

BMO Global Asset Management has £184bn in assets under management glob-ally, while the EMEA arm has over £80bn in AUM. The retail arm, which was formerly F&C, has £15bn in AUM, the majority of which is in the UK. However, the firm is building its wholesale presence in Europe, having opened offices in Madrid, Milan, Zurich, France, the Netherlands and Portugal over the past two years.

“As a business we want to be recognised as a global asset manager,” Thorpe says. “We have made significant progress in the UK over the past three years, which will help us globally. Our vision is to be global investment managers of increasing global significance.”

With four acquisitions under its belt over the past decade, will BMO be on the takeover trail again soon? Thorpe doesn’t rule it out.

“We are open-minded. We are very ambitious and we want to grow significantly globally. Nothing is ruled out. But as it stands we are already seeing strong growth from the existing business.”

BMO has an extensive fund range – perhaps unsurprisingly given the scale of the business – which it has been steadily building on over the past couple of years.

The Pyrford Global Total Return fund is an institutional product the firm rolled out to retail investors in November 2015. Its philosophy, Thorpe says, is not to lose money in a 12-month period and to return more than inflation. The fund only invests in AA government debt and high-quality equities. Hargreaves Lansdown’s Mark Dampier describes it as “a fund for the nervous and pessimistic”.

Thorpe adds the fund is proving popular with advisers, averaging £10m a month in flows. “The fund is now available across most platforms and a number of DFMs are putting it on the buy list for smaller clients. People like its simplicity.”

BMO’s biggest-selling fund over the past 18 months is the F&C Global Equity Market Neutral fund, a low volatility, long/short portfolio that launched in July 2015. The fund now has £500m in AUM, which Thorpe says is “very pleasing”.

Investors are continuing to take an interest in the firm’s multi-manager offering, despite the challenges facing the multi-manager industry in the shape of DFM models and the growth of passive solutions, Thorpe says. Headed by renowned duo Rob Burdett and Gary Potter, who will soon celebrate a 20-year track record together, the range has £3bn in AUM and is seeing positive net flows.

This month the pair’s MM Lifestyle range marks 10 years since launch, while the flagship MM Distribution fund – which now boasts £1.2bn in AUM – reaches the milestone in October. In December, the fund launched a monthly share class.

“The MM Lifestyle funds were the first-ever risk target range in the industry, and are the only one with 10-year track record,” Thorpe says.

Another first for the firm was the Foreign and Colonial Investment Trust, which was “the world’s first collective investment vehicle” in 1868.

“The trust, which is 150 years old next year, invested in US equities when they were still considered an emerging market,” Thorpe says. “It has evolved over time but it remains relevant. There are so many firsts in the organisation. We want to continue to innovate and offer products that innovate.”

BMO will continue to extend its range, Thorpe says, with a global equity fund and an SRI multi-asset fund under consideration.

In the meantime the firm will focus on rolling out its fixed income range to retail investors.

“30 per cent of the AUM at BMO is in fixed income, but in the UK intermediary space we haven’t done enough to position ourselves as a fixed income business, even though we have the capabilities,” Thorpe says.

“We need to focus on getting the message out. Our fixed income funds are predominantly institutional, although we have retail funds but they are not properly positioned for the wholesale and retail market. We are under the radar for fixed income – and I don’t think we should be.”

Bio

BMO Global Asset Management is one of the services provided by BMO Financial Group – which was established in 1817 as Bank of Montreal. The firm offers a range of products across asset classes and markets, including fixed income, equities, property, multi-manager, ethical funds and alternative investments.

Independent Views

Ben Yearsley, investment director, Wealth Club

I’m not sure what BMO/F&C really stands for these days. They seem to have a lot of fairly mediocre funds. Some of the longer term numbers look ok, but there isn’t a fund you’d really identify them for, except for the Foreign & Colonial investment trust maybe. Some of the bright spots include the multi-manager fund range run by Gary Potter and Rob Burdett. They’ve stuck to their style over many years now and should have pretty happy investors. Another surprisingly decent long-term fund over the past five years is F&C Managed Growth run by Paul Niven, which is surprising as it only invests in other F&C funds.

Rob MorganRob Morgan, Investments analyst, Charles Stanley

In the past decade BMO has expanded beyond its North American roots to become a global diversified financial services group. A significant milestone was the 2014 acquisition of F&C Asset Management, which gave the firm broad access to UK and European markets, adding to capabilities acquired in emerging markets and Asia through Hong Kong-based Lloyd George and in global equities through Pyrford. I like the fact that BMO employs a ‘multi-boutique’ strategy, allowing fund management teams to pursue their individual approaches. The group now has a range encompassing all the major asset classes, with particular strength in multi-manager funds under Rob Burdett and Gary Potter whom I hold in high regard, and in commercial property.

Jason Hollands, managing director, Tilney Bestinvest

In my view the cornerstone of BMO’s offering in the UK retail market is the multi-manager range, which is an important franchise among IFAs. BMO also continues to have a sizable presence in the investment trust savings scheme market with the venerable Foreign & Colonial Investment trust as the flagship vehicle. BMO is pretty much off the radar for us in core active equities, but it does have credible performance in both UK and European small-caps and remains a leading player in the responsible investment market. From here it needs to demonstrate it can attract and retain talent, bring over marketable capabilities that might sit within the Canadian business and raise its visibility in the UK market.