Trump card: Standard Life Investments’s Bambos Hambi

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Is Bambos Hambi quietly building the most powerful fund of funds business in Britain? He is already in charge of more than £10bn compared with zero when MyFolio was launched under Standard Life Investment’s wings in 2010, making his operation bigger than most boutique investment managers.

The MyFolio range of 25 funds is as broad as it is simple. At its heart is the idea that investors (and advisers) are able to identify their risk tolerance on a scale of one to five. After that, they choose whether they want income or growth. Then they pick from a package of in-house Standard Life funds, a portfolio of other investment manager’s funds, or a low-cost mix of mostly index funds.

Bambos – he seems to be better known by his first name rather than surname – loves the fact that since arriving at SLI (he was previously at Gartmore, Rothschild and Friends Ivory and Sime) he no longer has to constantly watch what others are doing.

“This is honestly the best range I’ve ever managed. I used to run balanced funds at other managers, and if you were top quartile the money rolled in. You were always looking at what the others were doing. But it meant that certain funds weren’t cautious, they were 60 per cent equity and got found out in the financial crisis. Here I really don’t look at what the other funds are doing.”

One surprise is that advisers have tended to plump for the “managed” (aka SLI basket of funds) rather than the “multi-manager” range. Perhaps less surprisingly, the most popular risk choice has been three (in the range of one to five).

That makes MyFolio Managed III the most popular of Bambos’ 25 funds. With £3bn under management it is a chunky fund in its own right, and enjoys strong performance, although comparing in-house managed funds is never easy.

It is up 12 per cent over one year and 23 per cent over three years, which means it has given investors more than promised, says Bambos. His target, over a 10-year timescale, is to achieve cash plus 1.5 per cent on risk scale one funds, rising to cash plus 5 per cent on risk scale five funds. He has easily hit those targets so far, although he is the first to admit the funds have enjoyed a good tailwind since 2010.

He has also enjoyed a good period for active rather than passive management. Even though the active funds charge around 30 basis points more than the passive “market” range they have consistently outperformed every year – until last year. “Last year most active funds under performed” he says.

He puts the funds’ success down to a rigorous approach to asset allocation and fundpicking. In a four-stage process, stage one is the strategic asset allocation, which is decided by a committee of eight people working for MyFolio. Secondly, he calls upon the 45 working on SLI’s giant Gars fund, who do MyFolio’s tactical allocation. They are expected to add around 40 basis points to returns.

Then Bambos gets his hands dirty actually picking the funds he wants to carry out the strategies. SLI signs a non-disclosure agreement with other asset managers so it can get a complete picture of a fund’s composition – in far more detail than financial advisers can usually see. The MyFolio team crunches the numbers on the funds and their underlying portfolios, carefully examining around 130 equity funds and 50 bond funds.

“We spend hours, sometimes days, meeting the fund manager,” says Bambos. After such an exhaustive process it’s no surprise Bambos is the a buy-and-hold merchant, typically investing for five years. We are a lot more patient now with fund managers. I used to be a renter of funds. Now I’m a partner with them,” he says.

Usually fund pickers never like anything with less than a three year track record. Unusually, Bambos will invest in funds with zero track record – if he trusts the manager. “We have seeded more than 10 funds. For example, we owned Threadneedle US Select which was run by a team of eight but seven resigned.

“They went to Artemis, where we became 100 per cent owners from day one. In their first year they outperformed the index by 5 per cent, in a market, the US, that is about the most efficient in the world.”

Current asset allocation across MyFolio reflects Bambos’ belief that Trump, whatever you think of his politics, is good for US equities.

“Since Trump’s victory we have been adding to risk, predominantly through equities. We also like European and Japanese equities.” He adds that these are not massive conviction bets, saying he has some concerns about elevated valuations and Trump-inspired trade conflicts.

“We see a stronger global economy and stronger corporate earnings. Looking at what Trump is saying on tax, spending and deregulation, we like cyclical stocks.”

“We have also been adding a lot more to European equities. Because of the French and Dutch elections, European equities have been under-owned and the euro has been weak. Italy, though, still has its problems.” In particular, he rates Invesco’s European Equity Income fund.

About the only major equity market where Bambos isn’t that confident is the UK. “We are underweight UK equities mainly because we see better opportunities elsewhere.”

So who is he selling? Sadly Bambos won’t criticise other funds in public.
Despite lots of prodding, he stays schtumm. If Bambos has a problem, it’s that he is just too nice.

Bambos Hambi

Joining Legal & General in 1978 after graduating in mathematics from the University of London, Bambos Hambi started out in the actuarial department before moving to the investment division. After roles at Morgan Stanley Quilter and Friends Ivory Sime Hambi joined Rothschild in 2001 to head up the fund of fund desk. Along with his team he joined Gartmore in November 2003 to build up its’ multi-manager business, before joining Standard Life Investments in 2011.

The numbers

25 Funds in the MyFolio range

£3bn Size of the MyFolio Managed III fund – the most popular in the range

12% Returns from the MyFolio Managed III fund over one year

130 Equity funds analysed by the MyFolio team

Key takeaway

Bambos Hambi is in charge of more than £10bn compared to zero when MyFolio was launched in 2010. Despite protectionism and valuation concerns, Hambi argues Trump is good for US equities. He also favours Japan and Europe, pointing out the UK is the one major market he lacks confidence in.