While shepherds watched their stocks…with BMO Gam’s Kelly Prior

In a festive Q&A series investment experts reflect on how much markets and work life have returned to normal in 2021


BMO Global Asset Management multi-manager Kelly Prior prefers UK and Asia equities and alternatives to fixed income heading into 2022 and is bracing for the Christmas day chaos, which this year entails cooking for 13 people

What have been your top and worst-performing fund picks during the year?

Of the funds that we have held for the year to the end of November the best performer has been the CIM Dividend Income Inc USD fund which has returned 27%, the same as the S&P 500. This is an Asian income fund so a more true comparator would be the IA Asia Pacific ex Japan fund which has returned 1% this year. We talk a lot about fund selection being of greater focus than asset allocation in our process, with the former being something where we can add value, the latter being a much more difficult task on a long term consistent basis. I think this is a great case in point. Conversely, the poorest performer has been the 1167 Global High Income fund, which is only held in one of our vehicles. The fund is focused on emerging market debt but in particular of late local currency, investing only in sovereign issues. Despite the clear undervaluation of local currency paper, it has been an out of favour area this year but we continue to retain exposure to this and other funds looking at this space with an eye on the longer term.

How do you expect the Santa rally to play out this year?

I think this year has more scope than most to be volatile and where we end up on 31 December is anyone’s guess. The heady combination of central bank policy changing, a new Covid variant doing the rounds and a lack of people actually in work, as workers use up their annual leave entitlement after another year of missed sunbathing meaning illiquid conditions could be “interesting”. Investing is something done over a five to seven year cycle so the focus on 1 January to 31 December performance needs to be put into context when big moves can happen on either of these dates with little to do with fundamentals.

What are your biggest over and underweights heading into 2022?

Equities have run a long way at the headline level in 2021, and while the economic outlook for 2022 looks strong this could be in the price. Bonds also offer little in return versus the risk in an environment of rising inflation and central bank policy that may be changing. We are not making big asset allocation calls as ever but we do have a preference for UK and Asia within equities at the expense of Japan and Europe at the margin. We are underweight fixed income, instead preferring alternatives such as closed-ended specialist property offerings alongside market neutral absolute return funds. We are also overweight boutiques and active managers as always. This is a very exciting time for active managers with volatility likely to remain elevated  – those that can look through the noise and pick up the long term winners stand to be well rewarded.

How have in-person meetings changed compared to pre-pandemic times?

The “greetings dance” is something that never fails to amuse me, as naturally some people are more happy to shake hands than others! Other than that I just think everyone is delighted to get back to face to face meetings. Though ‘Plan B’ has put a pause on this, I think we are all hopeful that we can resume quickly.

Are you going to have an office Christmas party this year? If so, what is the plan?

BMO Gam took the decision to allow smaller team gatherings rather than the usual large affair this year. The team headed out for a pie-fest and a few pints of ale just before Plan B came into force – it was a slow cycle to the station home for me after that!

How different are your Christmas plans going to be in 2021 compared to last year?

It is always chaos in our house, but this year more so than the last as I am feeding 13 people on Christmas day. Wish me luck.

What’s on your Christmas wish list?

To manage to avoid Covid (and food poisoning) for me and my guests in the run up to, and on, Christmas day would be helpful. That, and world peace should cover it.