BoB – the staff actually referred to one another as “Bobs” during the cocktails following the presentation – has on offer an existing $1 billion fund of fund managers, as opposed to a fund of funds. It launched in May 1999 as the “All Points Multi-Manager” fund but has only just received authorization from Hong Kong’s Securities and Futures Commission, hence this week’s formal unveiling.
The 'fund of fund managers' concept is best known as a Frank Russell product in the United States and Japan, and is new to the rest of Asia. Wayne Chapman, Bermuda-based senior vice president of investment services, says BoB is possibly the first, or is certainly among the first, and to offer this kind of product in Asia ex-Japan.
The approach means BoB picks a number of asset managers for various asset classes, each supposedly representing best of breed. Currently it has nine external managers, and the idea is they save clients the headache of screening and reviewing managers themselves. John Hawkins, executive vice president of BoB's private clients division in Hong Kong, says, “We outsource all money management on the basis that no one house can be the best in all fields.”
Stars on parade
To demonstrate this, BoB cleared the way for three guest fund managers currently involved in its multi-manager fund – a fixed-income specialist from JP Morgan, a US small-cap manager from Warburg Pincus and a European equities man from INVESCO Asset Management. The fund mangers were available for questions from the audience, but the audience’s queries indicated some confusion over the nature of the product, which kept Wayne Chapman on the hot seat throughout the Q&A. “Don’t you want to ask INVESCO about Nokia?” he asked the crowd.
In the process of fielding questions about how the multi-manager product worked, Chapman also noted BoB will slowly add managers to the current nine. One difference between BoB’s product versus Frank Russell’s is that the latter includes managers focusing on growth as well as value or quantitative strategies. (Russell’s also has far more assets under management.) But BoB’s current roster of managers is focused on growth strategies. Chapman notes too great a blend can dilute the aggregate return because managers could be working at odds with each other. On the other hand, he also says value managers may be added to the group over the next two years.
Since inception the multi-manager fund has outperformed a variety of equities benchmarks; for example, the fund’s US small-cap portfolio is up 109% versus the Russell 2000’s gain of 18%. It hasn’t faired as well on the fixed-income side: global bonds, short-duration bonds and high-yield bonds all trail their respective benchmarks. Chapman says as an aggregate, the multi-manager fund is up 17% since May 1999, versus an average gain of 4% for the various benchmarks.
