Q&A: BNY Mellon WM on fund selection challenges
Jasmine Yu is the director of manager research and monitoring for BNY Mellon Wealth Management.
Based in the firm’s New York office, Yu is responsible for manager research, selection and monitoring at BNY Mellon Wealth Management’s investments group. She sits on the Hong Kong investment committee and is responsible for fund selection for Asian wealth clients.
In an interview with AsianInvestor, she outlines the challenges of fund selection, how frequently funds are added or removed from the platform and the differences between Asian wealth investors and their peers in other parts of the world.
Q: How many funds do you have on your platform and how often do you add or remove funds?
We typically have around 300 funds on our platform – to the extent [that is] possible and applicable, all of these are available to Asian investors. This allows us to have meaningful position sizes in the managers we have selected. Our platform has traditional mutual funds as well as private equity and hedge funds. This quarter (October to December), we are adding eight new strategies to the platform. But that won’t be the same in every quarter. It depends on client activity and the needs of the business.
It’s quite rare for us to remove a fund, especially only because of poor performance. Poor performance is the symptom, not the root cause of an issue. If [our] research was done correctly, we would have let go of the manager long before the poor performance occurred. On the other hand, if a good manager is being challenged by difficult market conditions that are expected to mean revert, it could actually be the time to put more money in his or her fund.
Q: What is the biggest challenge for you as a fund selector?
In general, when we select an active manager, by definition, they won’t track the benchmark. So each and every fund selector will be tested when the manager underperforms – that is a given. For fund selectors, it is a challenge to be always keeping on top of emerging trends in what is a fast-moving business ... Every day, we see new things – new ways of investing, new managers in different segments, and so on. Keeping abreast of all these changes can be challenging sometimes.
Also, to really benefit our clients, it is important to have a view on the market and know what each manager does really well. It’s a combination of the two that is expressed in client portfolios and ultimately leads to an increase in returns or basis points. It’s a challenge but it is also what we strive to accomplish.
Q: How different are Asian clients from clients in other parts of the world?
Clients in different geographies have different investing profiles on average. In Asia, we have noticed that clients like transactions. Doing transactions is how our clients got rich as many of them are first- and second-generation entrepreneurs. They want to keep doing that.
In the US, by contrast, there is a big orientation towards investing in ... public equities and mutual funds. Meanwhile, in Europe, wealthy families and individuals have a strong preference for fixed income – they don’t like taking much risk and are in wealth preservation mode.
Such observations inform us broadly about what products/funds could appeal to investors from different regions.
Q: Where do you stand on the active versus passive debate? How do you view passives?
We offer active and passive strategies in our investment solutions. It’s not binary – it’s not just passive or active.
There is more than one way to make money and there are situations in which passive strategies are fully warranted, while in others, active [strategies] make more sense.
As always, one needs to study the market characteristics and manager universe. Every investment area is different and depends on how efficient a particular sector/segment is.
An extended version of this interview will be featured in AsianInvestor magazine in the upcoming December/January issue.
This story has been updated to reflect the correct spelling of the interviewee's name.