Spy found himself in Tokyo this week, drinking too much saké and talking about sakura, rugby world cups and local asset management promotion. The annual ‘hanami’ season is nearly upon us with the pink cherry blossoms giving joy and wonder to millions of locals and tourists. It is hard not to take the entire season as a metaphor for Japan’s dismal attempts at an inflationary boost. The flowering of inflation appears on occasion in the Japanese data only for it to disappear as soon as it has begun leaving the BoJ back where it started. What Spy did learn about, however, was the recent shift in Japanese fund marketing behaviour. It is out with the IPO roadshow and in with the conventional ongoing distributor sales push. IPOs are being restricted as banks are told to reign in the practice. Don’t expect to rush off to Japan and fill your new fund boots in a month; you may find the opportunity is as ephemeral as the April sakura.
Is there something in the water that asset management marketing teams are drinking in Singapore? Spy has heard in dispatches about two marketing exits this week. Apparently Vannessa Lee of Aviva Investors has stepped down and is moving out of asset management to another part of the financial services industry. Vanessa was previously with Visa. Meanwhile, Charmayne Neo has stepped down from BNY Mellon IM. No word where Charmayne is moving to or whether she is going to remain in the Asian asset management industry. Watch this space.
So Singapore is making its play to be the Luxembourg of Asia, as far as funds are concerned. National Development Minister, Lawrence Wong, told the IMAS conference in the Lion City yesterday that a new corporate structure is being proposed for funds known as a Singapore Variable Capital Company or S-VACC, which sounds awfully like a SICAV to Spy. Mr Wong claimed that the proposed new structure will offer asset managers lower costs and richer flexibility, as it will cater to both open-ended and close-ended fund structures. Importantly, asset managers should be able achieve some efficiencies by consolidating admin functions at the umbrella fund level. Spy is not 100% sure how much the idea will gain traction beyond the domestic market unless Singapore also signs up to Asean Fund Passport, on which it has been dragging its feet to date. Nonetheless, Spy heartily welcomes the move in the right direction if Singapore is to create a truly competitive funds industry.
Spy has to tip his hat to the investment banking industry this week in recognition of its masterful rebranding of debt. Not so long ago we had junk bonds. Now we have high yield. The US gave us perpetual bonds but Europe has given us the similar but far sexier sounding CoCos. (Who wouldn’t want a nice cup of cocoa while watching your interest coupons pop in? Sounds lovely.) And the latest stroke of bond marketing genius? Green bonds. Yes, the issuing of debt that supports environmental aims is now greener than the grass and as attractive as emeralds, apparently. Volumes of green debt issuance have been surging in the last few years. Lombard Odier IM has a climate orientated fund lapping them up. Natixis is also on the bandwagon enthusiastically encouraging investors to ‘go green’. According to Christopher Wigley of Mirova, a Natixis affiliate, “A green bond is structured like a conventional bond. It trades on a spread over government securities, and the liquidity is the same. But what is special about a green bond is that it finances environmental projects”. Er, so it’s debt, has risks like any other debt, provides capital to risky infrastructure but it is all okay because it might help save the Grizzled Skipper Butterfly from extinction. Remember dear investors, there are no new ideas, just old ideas in new clothing. Green is the new black.
What is the worst word in the English language if you are a private banker with a shred of credibility in Asia? “Scorecard” must be high, if not top, of your list. Every senior banker that Spy has spoken to of late says that sales practices have not changed much despite the rhetoric from private banks about putting their clients’ needs first. When it comes to delivering appropriate wealth solutions, the best solution can go straight out the window if the “scorecard has not been painted”. That means juicy commission-paying universal life insurance, structured products and FX deals are likely to jump to the front of the queue instead of sensible risk-appropriate funds and mandates…plus ça change, plus c’est la même chose.
It can’t have passed anybody’s notice that the UK will trigger Brexit next week and start a period of profound uncertainty for the asset management industry as it tries to follow the tortured EU/UK negotiations and predict its likely consequences for fund passporting across the continent. Lest any of the “Remainers” get too carried away, one sober fact about the EU was asserted this week by Daniel Hannan, a British MEP firmly in the Brexit camp: “Every continent on the planet has outgrown Europe this century – even Antarctica, if we count the increase in cruise traffic as economic activity.” Spy’s advice to asset managers: focus on Asia while May and her merry band of Brexiteers bargain long into the night. Asia’s demographics are great, growth prospects excellent and the food is damned tasty, too.
Are emerging markets in a little bubble? It is hard for Spy not to find an asset manager or economist who has become bullish, very bullish or extremely bullish on EM. In a comment, typical of many seen or heard lately, Ross Teverson, head of strategy for emerging markets at Jupiter, wrote quite simply this week, “We are optimistic about the outlook for emerging markets in 2017.” Spy is not inclined to disagree, except for that nagging feeling that when everyone is certain of something, well, it often ends in some disappointment along the line. Caveat emptor.
In Hong Kong, Spy’s photographers have seen a new advert looking like a Pixar promo from CSOP. A Buzz Lightyear-like Character who is saying that the firm’s L&I ETFs allow investors a chance to profit in either up or down markets.
Meanwhile in Singapore, UOB Asset Management is apparently looking into the future and has decided the future is distinctly techie. No prize for that particular claim!
Until next week….
