The Water Poet in Shoreditch would do really well on an episode of Cash in the Attic – or maybe it has done really well out of an episode. Its extensive rooms are adorned with an eclectic mix of bric-à-brac, writes Suzie Bliss.
The vibe is a bit like visiting the home of an estranged, quirky aunt; bizarre but cosy and you leave very well-fed.
This pub is the choice of Kelly Prior, investment manager on BMO Asset Management’s multi-manager team. The pub is conveniently a stone’s throw from the firm’s office on Primrose Street near Liverpool Street Station.
If the pub we are sitting in feels rather familial, then the same can be said for the team that Prior works with every day.
‘Our team has been together for 21 years,’ she tells me, explaining how core members of the team Gary Potter, Rob Burdett (co-heads of BMO’s multi-manager team), Paul Green, Wai-Ling Lam and Prior all began their careers together on the fund of funds desk at Rothschild Asset Management.
The nine-strong team runs £3.2 billion held in 11 funds of funds.
‘We recruit people we know will fit in with our team,’ she continues. ‘It is about having the right mentality and creating the right culture.’
We quickly study the menu and make our choices. In light of it being a Monday it is a small glass of white and a (albeit) rather naughty steak and chips for me, and a half pint and chicken Caesar salad for Prior.
When Prior joined Rothschild in 1994, she worked on both the private client desk and on fund of funds, but her talent for fund selection was spotted and she moved over to fund of funds full-time.
In 2001 the team moved to Credit Suisse and again in 2007 to Thames River Capital which was then bought by F&C in 2010. The team then come under BMO following its acquisition of F&C in 2014. Prior and the team now run the F&C money in the Lifestyle fund range.
After 21 years, the team is a well-oiled machine.
‘I’m naturally pretty bearish, whereas Gary is naturally more positive. It works because it means we have a proper discussion. The major benefit of working together for so long is that we can air proper views; we can be honest.
‘You need to have an open mind to do fund of funds. There are many different ways to skin a cat, as they say, and all fund managers have different perspectives on stocks and different styles that will work in different markets.’
Our food arrives and the portions are huge.
Within the funds, the team holds around 80 managers. They use a squad system that gets reviewed formally every six months and list of around 70 funds the firm does not own but monitors very closely. ‘It is like a football team,’ Prior says. ‘Those funds are sitting on our bench.’
As we finish our drinks, Prior explains how the team always tries to be innovative and that is evident in their appetite for seeding funds.
‘We don’t need track record to buy a fund manager. We are happy to seed new funds or back managers early in their careers. Luke Kerr is an example – Ashton Bradbury recommended we meet him. I was the first external investor he met but after we did the work, we invested and we’ve been very pleased with his performance since with the Old Mutual UK Dynamic fund.’
For Prior, there is one question you should always ask an investor.
‘Maybe I’m too simplistic. You should always ask if you are getting paid enough for the risk you are taking. There is always risk in investing but you must be adequately compensated for this. I’m also incredibly cynical!’
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‘People not charging enough for risk premium due to pricing off of an artificially low risk free rate. You should pay more for the risk you take.’
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‘Volatility will return and active management will outperform in the long term.’