Spy has not been able to walk down a street in Hong Kong without bumping into an asset management global head of sales who felt the inexplicable urge to leave Europe and meet up with clients in Asia this week. No doubt the frothy wealth management market is a lovely excuse to get on an airplane. But the coincidence that the Rugby Sevens is on this weekend may give the casual observer a tiny inkling of why the sudden rush to the Fragrant Harbour…
Spy reported last week that Franklin Templeton has got its mojo back. Another American giant that has had a few torrid years also seems to be shaking off the blues. Yes, the Pimco boys and girls in Newport have got a spring in their step, too. Bill Gross has settled his very public gripes with his former company for $81m ($119m less than he hoped for, notes Spy) and has, it must be said, very generously given the money to charity, giving everyone a feel good factor. But far more important than that unbecoming HR issue, performance is back. Pimco’s Income Fund is up more than 10% over the last year and has, this week, become the largest actively-managed fund in the US with $79bn in assets. The fund added more than $3bn in assets in March alone.
Schroders seems to be telling the world it is a brave new era with its rebrand quietly revealed this week. The firm has chucked out the old crest, which spoke of a bygone era of London City’s fusty family banks and asset managers, and brought in a truly modern, almost Silicon Valley-styling. Spy is sure that the Schroders’ team is hoping to reinvigorate sales with their shiny new look. Net flows were a tad weak last year – only £1.1bn of new flows compared to £13bn in 2015.
There is usually one stock or one fact that becomes the poster child of a market bubble, thinks Spy. Pets.com with $5.5M of revenue, losses on every single transaction and a post-IPO valuation of $2.2bn ticks the box nicely for the dot.com era. During the Japanese stock and property bubble leading up to the 1992 peak, the Imperial Palace in Tokyo was reported to be worth more than France. Supposedly a ¥10,000 note dropped in Tokyo’s Ginza district was worth less than the tiny amount of ground it covered. How about Hong Kong property changing hands for ludicrous sums in 1997, which marked the peak before the Asian crisis? Or perhaps you prefer the numerous Goldman Sachs & Company trusts promoted in 1929, which eventually crashed to nothing. These trusts, according to J.K. Galbraith, did not disclose their interrelated holdings nor the securities they held on the flimsy excuse that “To reveal the stocks they were selecting might set off a dangerous boom in the securities they favoured.” So what about now? Is there a canary in our current investment goldmine? Tesla may just fit the bill. Tesla just became more valuable than Ford with a market cap of $50bn. Profits, not so much. If this high octane enjoyable tale ends badly, don’t say you weren’t warned.
Spy almost fell off his chair this week when checking the MPF performance tables, which show a remarkable turnaround in the first three months of year. The vast majority of funds are performing well and are mostly positive over the last three months. Long suffering MPF investors are getting a well-deserved break. The star, as of the end of February, is MassMutual’s MPF Scheme-US Equity up 9.90%. Meanwhile, over one year, the best active performer is HSBC’s SuperTrust Plus-Asia Pacific Equity which is up an impressive 32%.
Did you hear that pin drop? “It is quiet out there, too quiet.” A great headline from a research piece by T Rowe Price. Whilst everyone has been enjoying an Indian summer of rising equities with low volatility, T Rowe’s Scott Berg points out the situation can’t last. At some point volatility must return. What did amuse Spy was Scott’s observation that business people have loved Trump’s presidency so far, while economists have not. In the long run, back the business people and not the economists, says Spy. They have a much better track record – after all, they deal in real money, not models.
In the industry we believe people should save money by buying funds. If you want a gentle reminder why, look no further than UOB’s amazing interest offer to its priority wealth management clients.
Yes, that’s right, put down $350,000 and get a stunning 0.15% in interest! UOB states, “UOB Wealth Banking is a priority banking service designed for clients with qualifying assets under management of S$100,000.” Generosity has never looked so unappealing.
Spy’s wild imaginings of classic films to depict the active/passive battleground continues this week with a Bruce Lee masterpiece. Who can fail to see the joy in the Hong Kong Kung Fu master portrayed as a crusading portfolio manager dealing blows to the passive robots?
No Spy next week as Hong Kong is on holiday for Easter and he is hiking the Ling Kok Shan trail.
