Presentacion gestor BMO Global AM: Funds Experience 2016

True Styles: Getting More Out of

Equity Style Investing

For professional investors only

October 2016

CM10663

Agenda

2

True Styles: getting more out of equity style investing

• Decomposing equity portfolio returns

• Is this a new idea?

• Will it persist?

• Can we do a better job?

• An investment proposition

.


3

Decomposing equity returns

Source: BMO Global Asset Management. For illustrative purposes only.

Alpha

IndexIndex

Alpha

Style Premia


4

Who is exploiting factors?

Source: National Bureau of Economic Research


5

Is this a new idea?

Source: The Journal of Finance For illustrative purposes only.


6

Observed returns of common factors

Source: BMO Global Asset Management as at 30.09.2016. Factset. 12.1987 to 30.09.2016. Universe: MSCI World. The returns represent observed outcomes of zero investment

portfolios that go long the top 20% of stocks with each particular attribute and go short the bottom 20%, rebalanced monthly, and do not include any transaction costs. This

information is not a representative investment strategy but an indication of the efficacy of each style. Logarithmic scale = It shows two equal percent changes plotted as the same

vertical distance on the scale.

Lo

ga

rith

mic

sca

le

0

100

200

300

400

500

600

700

800900

1000

-20

Value Size Momentum

.


7

Will they persist?

Why do factor premia exist?

Compensation

for taking risk

Result of

hardwired

human nature

Efficient market Behavioural


8

Observed returns of common factors




vertical distance on the scale.

Lo

ga

rith

mic

sca

le

0

100

200

300

400

500

600

700

800900

1000

-20

Value Size Momentum


9

Observed returns to raw and true style




vertical distance on the scale; PA = Per Annum.

*In this example, the ‘Raw Style’ is companies with a high book-to-price ratio

**Once our systematic approach has reduced the impact of overlapping styles the ‘True Style’ of companies with a high book-to-price ratio is revealed

Logarith

mic

scale

Return

(pa)

Volatility

(annualised)

Sharpe

ratio

Raw Style* 4.4% 12.5% 0.35

True Style** 5.6% 4.8% 1.16

0

100

200

300

400

500

6007008009001000

0

Raw Value True Value

Global Equity Market Neutral Strategy V10

10

Cumulative total return

Source: BMO Global Asset Management as at 30.09.2016. Global Equity Market Neutral strategy performance gross of fees, net of implementation costs. .

• Strategy has provided differentiated source of return

• Low correlation improves diversification and efficiency of parent portfolio

-15%

-5%

5%

15%

25%

35%

45%

Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16

Global Equity Market Neutral Strategy V10 Global Equity Market Neutral Strategy V6 MSCI World

BMO Global Equity Market Neutral Strategy – performance

11

Strategy performance

Source: BMO Global Asset Management, Bloomberg as at 30.09.2016. *Strategy inception based on full calendar month performance, 01.10.2014 to 30.09.2016 – daily

observations, performance is net of implementation costs and annualised. **BMO Global Equity Market Neutral Strategy [Volatility 6] performance is a simulated or hypothetical past

performance and is not a reliable indicator of future performance. Simulated or hypothetical performance results do not reflect actual trading and have certain inherent limitations.

Asset class correlations

3 months Year to date 12 months

Since

inception*

(annualised)

Volatility

since

inception

(annualised)

Global Equity Market Neutral Strategy [Volatility 10] 3.4% -0.5% 2.8% 12.4% 11.0%

BMO Global Equity Market Neutral Strategy [Volatility 6]** 2.0% -0.3% 1.7% 7.4% 6.6%

18.7 21.0

-9.1-6.2

-0.4

-6.1

-25%

-15%

-5%

5%

15%

25%

Global GovtBonds

GlobalCorporate

Bonds

Global HighYield

Global Equities EmergingEquities

Global HedgeFunds

Key portfolio characteristics

12

BMO Global Equity Market Neutral (SICAV)

Source: BMO Global Asset Management as at 30.09.2016. *In excess of the risk free rate, gross of fees. BMO Global Equity Market Neutral (SICAV) is an absolute return fund. BMO

Global Equity Market Neutral (SICAV) aims to deliver a positive return regardless of market conditions over a three year period but such a positive return is not guaranteed over this

or any time period. Capital is at risk and an investor may receive back less than the original investment. Capital is not guaranteed and there is no guarantee that a positive return will

be achieved over any time period.

Fund aims

Targeted styles: • Value

• Size

• Momentum

• Low volatility

• GARP (growth at a reasonable price)

Fund managers: Erik Rubingh

Christopher Childs

Structure: Lux SICAV (vol. 6) USD/EUR/GBP/CHF/SEK

Target excess return*: 4.5%

Assets under management (AUM): €80.6 million

BMO Global Equity Market Neutral Strategy

13

Does it tick the boxes?

Genuine alternative

Style driven performance

Daily liquidity

Diversifier

Competitive fee

Past performance should not be seen as an indication of future performance. The value of investments and income

derived from them can go down as well as up as a result of market or currency movements and investors may not get

back the original amount invested.

Disclaimer

Equity Market Neutral: An investment strategy that seeks to exploit differences in stock prices by being long and short in

stocks within markets, sectors, industries or countries. This strategy is intended to create returns that, over an extended

period of time, are uncorrelated with general equity market performance, however this cannot be guaranteed and over

discrete periods there may be a high degree of positive or negative correlation.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to

any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or

any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the

MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of

investment decision and may not be relied on as such.

Contact us

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the Financial Conduct Authority.

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and solutions

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BMO Global Asset Management (EMEA) – Head OfficeExchange House

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Tel: +44 (0) 20 7628 8000

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Economy & Finance

Presentacion gestor BMO Global AM: Funds Experience 2016