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Fund Profile

BMO Managed Portfolio 03 September 2020


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by CT Global Managed Portfolio. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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BMO Managed Portfolio Trust has two distinct share classes: Income shares (BMPI) and Growth shares (BMPG), each with discrete investment portfolios. As their names denote, these portfolios are managed separately with differing investment objectives.

Both strategies are managed by Peter Hewitt, who seeks to balance exposure to a variety of investment companies where he believes there are strong long-term management processes and identifiable and distinct strategies. A total-return mindset is adopted with regard to returns, and some downside protection in more adverse market conditions is desired whilst seeking to ensure the portfolios are exposed to long-term secular growth trends, as we detail under Portfolio. Peter will also seek to balance a variety of stylistic investment approaches and assets within both portfolios, though both are likely to be tilted in alignment with Peter’s view of market trends. This is based on a medium- to long-term view, and portfolio turnover is generally low.

This investment trust offers shareholders the ability once a year to convert shares in either share class to the other without incurring UK capital-gains tax, stamp duty, dealing charges or the ‘spread’. This dual-share-class structure is also utilised to enhance the income of BMPI, and the capital growth prospects of BMPG, through a mechanism which substitutes net income from BMPG for capital from BMPI, as we detail under Dividend.

Recent performance for both share classes has been very strong, driven in large part by exposure to technology, healthcare and other secular-growth-focussed strategies, as detailed under Performance. As we discuss under Discount, the share prices of both portfolios have typically traded within a narrow band around NAV.

Analyst's View

Performance has been exceptional in the past year. Whilst the Income portfolio has seen the NAV fall slightly, this is hardly surprising given the market backdrop over this time period, and Peter has commented that income generation looks robust. The income-transfer mechanism continues to support the level of distribution by the Income shares, and the progressive dividend objective of the board looks reasonably secure at a time when equity-market dividends look extremely precarious.

Having just experienced its best ever period of relative performance, it is reasonable to ask whether the Growth portfolio can replicate this in the immediate future. Statistically, this is unlikely. However, it is worth evaluating what has driven this performance, which has been the massive dispersion in equity-market returns by style.

The Bank of International Settlements has highlighted that there are presently much greater than usual ‘tail risks’ for both inflationary and deflationary outcomes. We believe the outperformance of secular growth themes, which strongly boosted BMPG’s returns, is a reflection of market expectation of these themes, but there are signs that beneficiaries of an inflationary outcome (commodities) are starting to outperform.

If this extends and broadens, BMPG could struggle in the short term, but the manager has noted that he is alert to such risks and will adjust the portfolio if there is evidence of sustained inflationary pressures. We think such an approach is in keeping with the long-term approach which has delivered good long-term returns.

Bull Bear
Strong long- and short-term returns on an absolute and relative basis
Rising inflation expectations would, in the short term, be a headwind to returns relative to the benchmark
Income shares offer a high yield of c. 5.1% covered by income on a trailing basis
May not suit investors who wish to control their own asset allocation
Share-conversion facility offers tax-efficient ability to adjust to different portfolio requirements
Gearing in BMPI can exacerbate downside as well as adding to upside
Continue to Portfolio

Fund History

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16 Feb 2022 Fund Analysis
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10 Mar 2021 Spring Conference '21
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04 Mar 2021 Slides and Audio: BMO Managed Portfolio
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04 Mar 2021 Fund Analysis
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03 Sep 2020 Fund Analysis
With Income and Growth shares, the BMO Managed portfolio offers different solutions to investors with different objectives through investment in a diversified portfolio of investment companies...
09 Oct 2019 Fund Analysis
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25 Sep 2019 One-stop shop: how multi-asset trusts offer superior diversification
Investment trusts are particular suited to this mode of investing. We examine their advantages over open-ended funds and highlight the trusts which do it well…
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