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BLOG: LDI Manager of the Year - BMO Global Asset Management

Written by Adam Cadle

The Asset Management Awards 2020:
LDI Manager of the Year: BMO Global Asset Management

The LDI Manager of the Year award is given to the LDI manager in the institutional asset management space that has a proven record of innovation and a range of efficient strategies to manage clients’ liability risks.

Emerging above the rest in this category is BMO Global Asset Management. The firm’s commitment to LDI clients is simple: manage complexity, deliver clarity. It works in partnership with clients to reduce, as far as the trustees are comfortable, their day-to-day operational burden. In addition, BMO Global Asset Management understands that LDI is not a product, but a solution, which needs tailoring to each client and to their position within their overall funding journey.

In the 2019 Greenwich Associates LDI survey, the company was ranked first in design and philosophy underpinning the proposition; managing structural risk; best at implementation flexibility; best at partnering to drive innovation and product solutions; best source of intellectual capital transfer; and usefulness of formal investment review meetings (joint).

The firm has also adopted greater integration of an enhanced LDI analytics system to further improve the reporting available to clients and has also launched new services for pooled fund clients like automatic leverage rebalancing between leveraged and unleveraged LDI funds, whilst maintaining the overall level/profile of hedging and the reporting and monitoring against client-specific liabilities, in combination with automatic rebalancing to hedge targets.

Clients can achieve meaningful efficiencies by integrating their credit and LDI assets within a single solution. By combining LDI and credit assets, BMO Global Asset Management has developed a ‘smart rebalancing’ process that uses cash generated by the corporate bond portfolio to top up cash in the LDI portfolio if it goes below a target level. It also passes cash back to the corporate bond portfolio for reinvestment if there is too much in the LDI portfolio. This smart rebalancing process is employed in both segregated and fund based portfolios.

In terms of ESG integration, the firm ensures that ESG criteria are explicitly considered when assessing a bank’s suitability for inclusion on its approved counterparty list and that it proactively engages with counterparty banks on ESG related topics.

BMO Global Asset Management has also shown excellence in execution and this can be seen in its repo book. To deliver the best outcome, one wants to concentrate one’s book with
the most competitive banks in the market, which is what the firm has done. For example, concentrating the majority (c.95%) of its repo book with the five best priced banks.

The judges were quick to applaud the firm’s outstanding performance in its BMO Real Dynamic LDI Fund and BMO Nominal Dynamic LDI fund.

Congratulations on a fantastic entry.

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