It has been so quiet in the Fragrant Harbour, Spy seems to have been the only soul working in Hong Kong this week. Give Hong Kongers two public holidays in a single week and that is all the invitation needed to disappear for the whole week and forget about wealth and asset management. On the plus side, Spy was able to book into restaurants that are usually too busy to give places to the hoi polloi. Dim sum in elegant Duddell’s, with a gracious host, allowed Spy to pretend the world’s problems had disappeared, like the rest of Hong Kong. Alas, the world’s problems are still there: Brexit, France, Chinese credit questions, Sluggish Asia, tumbling commodity prices, toppy global markets, overvalued property. Take your pick. And, oh yes, the crowds will be back on Monday.
In the absence of much local news, Spy has been keeping an eye on goings-on elsewhere. It has caught Spy’s eye that Ted Seides, he of the famous 10-year hedge fund bet with Warren Buffet, is attempting to defend the hedge fund industry with vigour. In a lengthy piece, worth reading by every active fund sales person, published on Bloomberg, Mr Seides more or less implies that Buffet simply got lucky backing the S&P 500 and that the S&P 500 is unlikely to outperform like that again in the next decade. He reckons he would double down. Maybe so, says Spy. However, the difficult truth for the hedge fund activists is this: Buffet and the S&P 500’s long term track record is pretty impressive while the hedge fund industry has disappointed all too often.
Don’t bet against the Fed. That message has been a Wall Street dogma for years. Ever since Alan Greenspan acted with his famous “put”, equity and bond markets have been driven by a wave of central bank liquidity. As we all know, other central banks across the world have decided, if you can’t beat ’em, join ’em in this strategy, flooding the world with liquidity and acting as a buyer of first, last and every resort. This can be neatly summed up by the following chart of the new, revised investment cycle that Spy spotted while doing the rounds. Many a true word spoken (or in this case, drawn) in jest, notes Spy.
Is that a bandwagon I hear rolling past, playing Beethoven? Every portfolio manager Spy has spoken to of late seems to be getting very bullish on Europe. Now that the French election seems all but over bar the shouting, with a reassuring dose of status quo in the form of Monsieur Macron, it seems everyone can get back to fundamentals. Ian Ormiston, portfolio manager of the Europe (Ex UK) Smaller Companies fund at Old Mutual Global Investors writes on his blog: “Europe’s dog days look to be over. After years of relative stagnation, the backdrop for European equity investors is now a handsome one.” Bold words indeed about a region that has seemed sclerotic for years, and yet a similar story is being told repeatedly. Time to dip those toes in undervalued European waters again?
Tumbling out of bed – that seems to be the right phrase for what has happened in the commodities market in the last few weeks. The Trump “reflation trade” has been running out of steam and a dose of oversupplied reality has flooded back into the market. Gold, silver, oil, iron ore and others have all had a rather torrid time. At the time of writing, oil is below $45 with the shale producers gushing supply onto the world market. How have commodity funds been faring after such a good run last year? Of the 14 commodity-specific funds registered for sale in Hong Kong, only four remain in positive territory over the last six months. Hats off to Parvest’s Equity World Materials Classic. It is top of the pile with a respectable 12% return over the last six months. In contrast, Investec’s Global Gold is having a miserable time, it is down 18%. JP Morgan is going to have to earn its fees with Saudi’s Aramco float, reckons Spy!
You have a shiny iPhone in your pocket. How about an iBond Fund? Apple revealed $256bn in cash reserves in its quarterly results this week. As staggering as that amount is, of more interest to Spy was that quietly, Apple has become one of the world’s biggest investors in corporate debt. It currently has $148bn of those reserves allocated to corporate credit. I wonder how happy their shareholders are, knowing that they are not just investing in a tech company but also effectively a bond fund bigger than Vanguard’s Total Bond Market Index Fund which has $145bn. Is there an app for that?
JP Morgan held its annual Corporate Challenge race in Singapore last week. Spy noted that Richard Morris of Eastspring Investments placed 13th, the only representative of the asset management industry to place in the top 50. Does this mean the others were all below benchmark?
News has reached Spy that Old Mutual International, the global wealth platform of Old Mutual has signed up to be the new sponsor of the Hong Kong Rugby Union’s domestic men’s league. Expect to see a lot more of the green anchor kicking around Hong Kong, so to speak.
Spy’s photographers in Hong Kong have spotted some new advertising from Value Partners promoting High-Dividend Stock Fund and Value Partners Classic Fund on the MTR.
Until next week…
