Meet the brains behind an Investing Revolution
Launched a little over a year ago, the simplicity of risk-based investing offered by MyFolio has already proven very popular with investors. Lansdown Place Magazine talked to Bambos Hambi, the overall fund manager at Standard Life Investments, to find out how his team works tirelessly behind the scenes to ensure you don’t have to.
Why develop these funds now?
There are roughly 2,500 onshore funds available to investors today; plus 5,000 offshore funds. Standard Life conducted research that showed investors found this huge choice quite daunting. MyFolio pools the best of these funds together in three styles with five funds of funds for each style, graded according to their risk rating. Also, the volatility that we’re seeing in today’s markets is creating concern among investors. So investors are unsure as to where they should put their money: bonds, equities, property, absolute returns? We invest across all these areas to spread the risk.
What’s so good about them?
The funds are simple to understand; they’re managed by experts with many years of experience. By providing a package of funds and asset classes we try to smooth returns over time. Any changes we make don’t incur capital gains tax for the client. And because it’s essentially one product, the paper work is dramatically reduced – we do that for you. We do the research; we interview the fund managers. I have a dedicated team of five analysts here in the City. Of the 2,500 funds available in the UK, I would say only 10% are worth investing in. We travel and meet fund managers all over the world, but nowadays we have video-conference facilities so we can cut on the amount of time and money spent on traveling. There simply aren’t many risk-rated funds out there. So it’s very exciting to be part of this new structure. I believe this is the best product I’ve ever managed.
How do you monitor the risk ratings of these funds?
Barrie & Hibbert are a world leader in risk profiling and we use their optimiser that breaks down each MyFolio product, from I toV, by asset class. (See chart). Together, we review this every quarter; it’s quite firm but we’re quite happy with it. Alongside that, Standard Life Investments has a large team of strategists and economists up in Edinburgh that constantly look for opportunities in the market. They look through the noise and focus on fundamentals. We have allowed a 5% flexibility to these asset allocations
should the need arise – we may need less or more exposure to certain assets, such as European equities or Japanese equities, where we are currently light. As the fund manager, I monitor the risk levels on a daily basis. We also have an operating committee that meets monthly, and they look at whether we’re delivering what we set out to. There’s also a risk team that meets quarterly with every Standard Life Investments fund manager and checks that they’re meeting their risk targets.
Do you offer value for money?
Due to our buying power – we’re investing hundreds of millions of pounds – we get great deals on price. We are quite often buying into funds at below half the normal management fee level.
Why does Standard Life offer three different management styles?
If investors believe that fund managers don’t outperform benchmarks, then we have something for them – the passive option, which invests in tracking funds and some property exposure. Then we have the multi-manager range investing in Standard Life Investments funds, and finally there’s the managed range investing in the whole of market. The latter requires the most amount of work from us so it carries the highest fees. I am invested across all three with my own pension fund, with the same Level V risk option. My own money is in my own funds. It’s the sort of commitment I look for when I speak to the managers of funds we’re interested in.
Who might these funds suit?
Investing by risk suits long-term investors because they’re able to adapt their risk choice as they get older. When they’re young they might want to choose a risk rating V for maximum return, but as they get nearer retirement, they might want to limit that volatility with a lower risk rating. And, of course, you can invest in more than one fund simultaneously if you want to spread your exposure to risk.
Why should people invest their money with you in particular?
A little over a year ago I was appointed as an independent non-executive member of the governance committee, which is responsible for overseeing the process and structure of the MyFolio range of funds. I was very impressed and I wanted to work with it. So when I became aware of a vacancy for the post of fund manager I was very keen. I had to go through a rigorous six-month process and many interviews before I was eventually chosen from a long list of candidates. Before this I was at Gartmore and before that Rothschild Asset Management, managing over £1bn. I’ve done this for a long time, but this is the best role yet.