Bob Boyda has legacies on his mind.
Manulife’s multi-manager maven is only a few years away from retirement, and he is not only thinking about what he and his team have created, but also the focus he inherited from his father – a Canadian steel worker who has, perhaps unintentionally, changed the way modern-day fund selection is carried out.
Over Boyda’s long career with Manulife and its subsidiary John Hancock, the firms have taken subadvised funds to the retail market and have helped to make multi-manager funds mainstream. That's no mean feat.
‘We took a really good institutional concept and we brought it into retail, retirement and the mutual fund business. I still think it is a really wonderful business model,’ he says.
‘And we have gotten smarter and better at selecting managers, at understanding the nature of active management. I want to contribute that as part of a legacy to the industry, so that we are giving back.’
He is at pains to point out that this is not just his work, but that of a wider team.
‘I never do this alone,’ he says. ‘We’re a team. I don’t want anyone to ever think this is mine. It has been awesome to be part of the builder class and the management class, but now it is time to pass it on to the next generation. But the next generation is the custodian not the owner.’
The great shake-up
Multi-asset multi-manager funds may seem old hat today, but back in the 1990s they were not widely available to retail investors.
‘When we started off it was a concept sale,’ Boyda says. ‘It’s hard to imagine in 1994 and ‘95, in the retirement market, the world as we knew it was focused on finding a single fund, run by a large, branded fund company, on which you could hang the entirety of your future and live with it for eternity.’
Perhaps one reason why no one else was offering these portfolios – often made up of as many as 45 different strategies – was that while conceptually simple, they were devilishly complicated in practice.
‘In 1999 we began a process looking how to put multiple managers inside a portfolio using a scheme that would eventually become known as double optimization,’ Boyda says. ‘We optimized the asset classes first, then ran sophisticated algorithms to look at managers and how they made money and how to put them in a portfolio, understanding which managers would zig when others would zag.’
To do this, Boyda’s colleague Rob Sykes built an attribution model, which looked at alpha from asset allocation, manager and style. The computer power needed to process this required its own system, which was designed by Janet Campagna, now chief executive at QS, part of Legg Mason.
Then portfolios underwent a simpler but sterner test run from Boyda and his co-manager Steve Medina, who is now Manulife chief investment officer for developed equities.
‘Steve Medina and I would sit back and ask “But would I actually own that portfolio?”’
JOHN HANCOCK MULTI-MANAGER LIFESTYLE GROWTH PORTFOLIO: TOP 25 HOLDINGS
Source: John Hancock Investments
|International Strategic Equity Allocation Fund (JHAM)||7.01|
|US Strategic Equity Allocation Large Cap Sleeve (JHAM)||4.99|
|Capital Appreciation Value Fund (T. Rowe Price)||4.26|
|Equity Income Fund (T. Rowe Price)||4.16|
|Mid Cap Stock Fund (Wellington)||3.55|
|Mid Value Fund (T. Rowe Price)||3.55|
|Disciplined Value Fund (Boston Partners)||3.24|
|Fundamental Large Cap Core Fund (JHAM)||3.19|
|Blue Chip Growth Fund (T. Rowe Price)||2.97|
|Capital Appreciation Fund (Jennison)||2.91|
|Strategic Growth Fund (JHAM)||2.91|
|International Value Fund (Franklin Templeton)||2.61|
|Emerging Markets Equity Fund (JHAM)||2.55|
|Bond Fund (JHAM)||2.54|
|Emerging Markets Fund (Dimensional)||2.52|
|International Growth Fund (Wellington)||2.5|
|International Growth Stock Fund (Invesco)||2.46|
|Strategic Income Opportunities Fund (JHAM)||2.26|
|Technical Opportunities Fund (Wellington)||1.97|
|Total Return Fund (Pimco)||1.92|
|Value Equity Fund (Barrow Hanley)||1.85|
|Floating Rate Income Fund (WAMCO)||1.79|
|International Value Equity Fund (JHAM)||1.75|
|Global Equity Fund (JHAM)||1.74|
|Global Absolute Return Strategies Fund (Standard Life)||1.61|
This was a test originally set by his father, and one which has driven Boyda’s manager selection process his entire career.
‘One of the sustaining principles of selecting managers was that they had to manage money for us, for their clients, in a way that they would manage their personal money. This came from a deep-seated belief that my dad gave to me 40 or 50 years ago,’ he says.
‘He said “I think the big boys have all the information, they know how things work; if only they would manage my money the way they managed their own, life would be great.” So one of the questions we always ask is “If things go wrong, who’s going to be hurt worst – my investors or you?”’
This has led Boyda to seek out managers who not only eat their own cooking but who eat a lot of it. He practises what he preaches too.
‘I know I’m in the same shoes as every one of the investors in our multi-asset multi-manager funds because I’ve had a strong hand in selecting the managers… and all of my liquid assets are in them,’ he says. ‘If I’m selecting managers, I really own them.’
One example of this is the team behind the Standard Life Investments Global Absolute Return Strategies fund, which subadvises the John Hancock Global Absolute Return Strategies fund that is held in a number of Boyda’s portfolios.
The strategy was originally used to run the Standard Life employees’ pension scheme, and has been estimated to represent around 30% of the parent company’s revenue stream in recent years.
‘This whole idea of who is going to suffer worse if the thing doesn’t work… well, they bet the company and its pension plan on this particular way of managing money,’ he says.
The fund has suffered a dip in performance in the past couple of years and saw its architect Euan Munro exit to start a similar strategy at a rival shop, but Boyda backed the firm to fix these issues.
He faced a similar situation when Bill Gross left Pimco and its Total Return fund to join Janus. Boyda lobbied hard to stick with the fund’s new management, and so far has been vindicated by its three-year numbers.
Still going strong
Recounting these stories, Boyda has clearly lost none of his passion for picking managers. He demands the same enthusiasm from PMs too.
‘Tell me that when you get up in the morning, you are lit up by going in to work and facing the incredible complexity in the capital markets… and you still want to get up every day and go into battle, not just for you but for your investors,’ he says.
‘He’s an 80-year-old man picking tech stocks, but if you meet Sig you will understand this is all he cares about and has cared about since the 1970s,’ Boyda says. ‘He has been managing money in this style since before there was a benchmark to measure his outcomes. He still comes to work with the fire in his belly.
‘We select managers on those intangibles – the fire and desire to succeed… then it includes all of the details.’
On a flier
And those details matter too. Boyda and his team spend a lot of time analyzing managers to figure out how they generate alpha, recognize mistakes, make decisions, size positions and pick securities. If something doesn’t add up, they will know about it and won’t let managers forget.
‘Once upon a time we had a meeting with the CEO of a very large third-party asset management organization and he had one tiny little position that looked, to us, outside of what this one very good quality value manager had done all of his career. Steve Medina, my partner back then, picked up on it right away,’ Boyda says.
‘The manager finally capitulated and said “It was a really good idea from one of my analysts and we decided to take a flier.” It was a tiny little position that wasn’t going to amount to anything but it became the topic of conversation at every single update meeting for the next 17 years.’
Another moment Boyda will never forget is the Boston Marathon bombing of 2013. He was running the race for the first time that day, and was just two miles from the finish line when the blast went off, killing three people and injuring several hundred others.
That moment galvanized Boyda’s resolve to go back the next year and finish the race, and to further help charitable causes in the city.
‘I had to run again in 2014, because I had to finish,’ he says. He has now run five marathons in total, with 2017’s race being his last hurrah. It has all been part of an effort to raise money for South Boston Neighborhood House, which helps children from low-income families.
‘I want to be able to give back for all the work they do in the community through the five marathons,’ he says.
‘It’s something I’m very passionate about. It’s about serving our community, whether on the investing side or the charitable side. That’s the legacy that should come out over the past 25 years.
‘Whether it’s my dad or my neighbor, these are the people that need to be front and center and I want every single dollar of theirs to be treated as if it were my own. That’s the mentality. If we leave that imprint on anyone who comes to manage money, then job done.’