“I have always been involved with mutual funds,” he says. “I have had a variety of roles, starting in 1984 as a trainee fund manager. Following this I spent a number of years in mutual fund sales and, in the mid-’90s, relocated to the US to take up a role as a portfolio specialist.
“I joined UBS in 1999, initially working within asset management to establish a UK presence for the company in the IFA market, before moving to fund research in 2002.”
Since then McGuire has been part of the team in charge of carrying out proprietary research on third-party and in-house funds for both advisory and discretionary platforms. McGuire’s days often involve a lot of communication with team members around the globe.
“I am part of a team that has locations in London, Zurich, Hong Kong and Singapore. Together we are responsible for the proprietary research of long-only fund managers across all asset classes,” he says.
Dream team
McGuire considers himself a “generalist”, with a particular responsibility for UK equity and Europe ex-UK equity funds. However, team members around the world have a tighter focus on specific asset classes.
“We work closely with our colleagues in Zurich and Asia, and will leverage them appropriately. We are in constant touch with each other, sharing new ideas and discussing existing approved funds.
“None of us has a monopoly on good ideas and, as our research process employs the same methodology across all locations, having this ongoing dialogue is essential.”
In London, McGuire’s team has 55 active approved funds under its watch, across both bonds and equities, which in most cases can be used both in the UK and elsewhere.
“Our investable universe is any open-ended long-only fund that is registered for sale in the UK, so mainly funds here, in Dublin and Luxembourg,” McGuire says.
“We regularly monitor performance and meet companies that are either on the list already or are looking to become approved on a regular and ongoing basis. Much of our time is also spent working with our advisory and discretionary colleagues in the UK, Zurich and South East Asia, to keep them up-to-date with the approved funds they are using. “
One of the big industry changes McGuire has worked through is the Retail Distribution Review, which has had a significant impact on how his team operates.
A major focus now is to work evermore closely with the UBS legal and compliance team to make sure all the funds on the list, both in-house and third party, stay in line with regulatory requirements.
He says: “Since the financial crisis of 2008, we now spend proportionately more time looking at risk, notably a fund’s liquidity, both in terms of the percentage UBS may own on behalf of clients but also that of the underlying portfolio.”
McGuire’s research team is responsible for providing approved funds to his wealth management colleagues rather than making any asset allocation decisions or developing macro views.
The UBS CIO office develops the house view and makes strategic asset allocation decisions, which are then overlaid with a tactical asset allocation undertaken at a portfolio level by the investment management or advisory team.
The manager research team makes sure that whatever the views of the UBS CIO may be there are approved funds available that can be used to express these in the portfolios.
“The most important aspect to this is that we remain aware of the benchmarks being used by the UBS CIO and that the funds we select can reflect these,” according to McGuire.
As it stands, UBS is keeping faith with Uncle Sam. “The US economy remains in pole position, making US assets our preferred choice,” he says. “We are holding overweights in US equities, high yield and the dollar.”
These views are formed with a particular timeframe in mind.
“The UBS CIO team advises that this is best addressed through looking at our strategic asset allocation with a focus on a five to seven-year time horizon.
“The behaviour of asset classes as emerging market debt. We anticipate a world of lower nominal demand growth, a slow normalisation in monetary policy and higher market volatility than enjoyed in recent years.
“That suggests a stronger emphasis on asset classes such as corporatemcredit, where we believe yields on offer are attractive relative to our fundamental view on interest rates and future corporate health.”
Adjusting for volatility, McGuire says there is a “strong case” developing for upgrading broader debt exposure at the expense of equities, both in terms of high-yield and emerging market debt.
“We believe high-grade bond returns will be dull and we stress the case for lower-duration risk in bond portfolios,” he says. “We also see the case for less cash in portfolios, given the option of using high-grade shorter- dated debt instruments. Commodities will still struggle as inflation remains low and supply expands.
“In terms of tactical asset allocation positioning, we focus on three components of the business cycle: sentiment, momentum and valuation,” McGuire says. “Our business cycle models have picked up the weakness outside of the US.”
Making the grade
McGuire’s many years in the industry have taught him a keen sense for what he wants to see in a fund being considered for approval and, just as importantly, what he does not.
“Our fund research process has been in place for well over a decade,” he says. “Our main objective is to align a manager’s stated investment philosophy with how they actually manage the fund. To do this we focus on a number of factors, including the research analysts, experience of the managers, portfolio construction, risk management and turnover.”
Regularly meeting the fund managersmin person is also key to how McGuire works. It is not easy to gain his approval without a decent track record, although McGuire emphasises he would not approve a fund on this alone.
“Our process continues to evolve but remains true to its original objective: to understand how a manager achieves risk-adjusted returns and whether or not we think that is repeatable.
“We avoid managers who cannot explain what they do and where we perceive them as taking large bets on a particular outcome,” he says.
One product mix McGuire and his team are watching particularly closely at the moment is exchange-traded funds.
“The growth of ETF’s has been an area we have leveraged and will continue to do so as they can offer better opportunities in some asset classes for tactical asset allocation decisions.”
Another focus is heavier scrutiny of fees, particular in terms of parity between what is on offer to different buyers.
“We continue to add more to our universe so that we can offer our clients both active and passive managers,” McGuire says.
“One upshot of this has been that fees have become very important. A frustration for us is that there is not a level-playing field when it comes to fees, with so many share classes in the marketplace that seem to be offered only to particular clients.
“Although low fees do not drive our decisions, we are keen to get the best for our clients.”
