ETF selection
Chan, who is also the lead manager of the balanced fund and is supported by two Hong Kong-based portfolio managers, first reviews asset allocation views recommended by the global multi-asset team, according to Jon Adams, Chicago-based director and portfolio manager for multi-asset solutions.
“Our recommendation right now is overweight equities relative to bonds, and within equities, overweight US equities relative to the rest of the world,” he said.
Jon Adams, BMO Global Asset Management
Like other wealth and asset managers, the firm’s views are supported by strong economic and earnings growth in the US, which is also driven by the recent tax cuts, according to Adams.
The fund has a 37% allocation to US equities. Overall, it has a 66% of its assets in global equities, Chan added. Selection of products focuses more on the ETF strategy and tracking error.
The manager also invests in smart beta ETFs, depending on whether specific factor exposure is desired. But leveraged and inverse products are excluded.
PBs as competitors
The fund is distributed through BMO Private Bank and iFast’s B2B and B2C platforms in Hong Kong, and in Singapore, via the B2B platform, according to Adrian Chan, vice president for sales. He joined the firm in November from Value Partners, where he was also vice president for intermediary sales.
Chan acknowledged that it will be difficult to sell the balanced fund to private banks, which already provide asset allocation recommendations to their clients.
“A lot of the banks would have their discretionary asset management platforms, and in some way, this would be a competitor to their internal products,” he said.
However, he believes that there is demand from small- to mid-sized wealth managers, especially from the Hong Kong-based subsidiaries of mainland wealth managers.
Long-term, the firm has a view that the fund can also be distributed via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme, according to Sriskandarajah.
“The reason we want it to be a Hong Kong-domiciled fund is, at some point, we want it to be eligible for the MRF scheme.”
The firm also hopes to participate in the Hong Kong-China ETF Connect scheme, he added.
