Spy was consuming large quantities of Ricard on ice with a private banker from Paris this week. France’s favourite liquorice-flavoured peasant drink has left Spy nursing an horrific week end hangover. Ricard was invented by the makers of the hallucinogenic drink Absinthe Pernod. When Absinthe was banned by the Vichy regime, Pernod came up with something almost as tasty but not quite as lethal. Spy in his drunken state thinks the manufacturers of packaged mortgage-backed securities, credit default swaps and sub-prime loans have done a similar trick of late. They have removed the “wormwood-like” toxic ingredients and have repackaged them. It does not mean you won’t get a headache if the volatility comes back, though. Caveat emptor, reckons Spy.
Pinebridge has continued its hiring spree, Spy has learned. The firm has hired Louis So from State Street Global Advisers in a product development role to be based in Hong Kong. Pinebridge, owned by Hong Kong tycoon Richard Li, now has more than $85bn in AUM. Pinebridge’s best performing fund in Hong Kong is their European Equity fund, which is up more than 29% over the last year. Nothing to sneeze at.
Remember SAC, Steven Cohen’s really aggressive hedge fund that had to sit in the naughty corner for insider trading? In 2014, after the scandal, that business was renamed Point72 Asset Management, converted into Cohen’s personal family office, and was effectively barred from taking external client money. In January 2018 the ban comes to an end and therefore clients can start investing again with the high octane firm. It comes as no surprise to Spy that Point72 has been hiring in the region. Christine He from Goldman Sachs has joined as an investment analyst and Francis Zhang joined from Hutchin Hill as portfolio manager looking at quantitative strategies. There is an old saying, “There are no second careers in American business.” Spy suggests Steven Cohen doesn’t follow that script.
Is it the tail end of the silly season when journalists get bored and start speculating, or does the asset management consolidation trend remain in full swing? This week news stories have kicked around Europe that BNP Paribas is looking to buy Axa Investment Management and its €735bn of assets. Meanwhile, down under, Commonwealth Bank has suggested it is looking to IPO or sell its Colonial First State asset management arm. With the pressure on active fees, it hardly comes as any real surprise that investment bankers have spotted a rich new vein of financial consolidation to broker. Spy’s advice: keep an eye on the listed asset management groups, there may well be some action as everyone wonders who is next? Jupiter, Legg Mason, Franklin Templeton, Invesco?
As the market grinds higher, there are always a few party poopers willing to cry “market top”. This week it was the turn of bow-tie wearing, commodity-loving, high profile investor Jim Rogers. Jim thinks an ugly bear is coming and the real victims will be the blind, ETF-buying zombies who have no real idea what sits in their ETF portfolio. Jim thinks people should be trying to buy stocks that are NOT held in an ETF. Good luck with that. With the amount of ETFs on offer, it must be a very small pool of equities that have eluded a tradeable index, thinks Spy, who is waiting for someone to launch an ETF with the strategy of holding stocks that aren’t in other ETFs.
Earlier in the year it was Schroders who decided to have a completely new look – out with the stuffy crests and in with a sans serif font and stylized target. Now, news reaches Spy that Vontobel Asset Management has decided to take on a new brand. They, too, have chosen a simplified font and rather striking imagery. In their communications about the new look, Vontobel said, “We have decided to sharpen our identity both in content and in form. With our new visual identity, we are assuming a bolder stance and sending a visible signal.” Fair enough, but what may get investors more excited is the Vontobel Global Equity Fund that has had an annualised 10% gain for more than a decade. Now that is a bold stance, thinks Spy.
Let’s play a nice game of guess the new income fund winner, shall we? It is common knowledge that Pimco has had the most phenomenal run selling its income fund in Asia. Every private bank in Hong Kong and Singapore has been distributing units like it is Christmas. However, the drumbeat of concern about having too much of one product, no matter how stellar its performance, is mounting. Spy has been hearing from numerous banks they are actively looking for an alternative that can be promoted. Even banks seem to understand the oldest wisdom in the book, “Don’t have all your eggs in one basket”. No doubt Jupiter’s Dynamic Bond and M&G’s Optimal Income must be in the frame, among others. Word also reaches Spy that Schroders is muscling into this space with its Global Credit Income Fund, which will soon have a one-year track record. Let Spy never hear a fund selector say there is no choice out there.
What happens when the punchbowl gets taken away? Spy is watching one chart more than most. Yes, readers – the margin data. When margin becomes expensive, expect markets to get a whole lot cheaper.
What is good value in tech? Spy is not sure this mercurial sector of the market is easy to value. He seems to be in good company. Aberdeen Standard’s, Thinking Aloud blog nailed it again this week with this observation: “Tencent’s Hong Kong-listed shares are trading at nearly 50 times earnings. Meanwhile, Alibaba shares in New York trade around 60 times. To put these numbers in context, shares of Facebook, Google, and Apple trade at some 39, 30 and 18 times, respectively. However, Tencent and Alibaba look like bargains next to Amazon and Netflix on multiples of more than 247 and 213 times.” Priced very finely indeed, thinks Spy.
What is your expression of the week, wonders Spy? It must be “Reverse QE”. The Fed has announced a modest curtailment of its balance sheet and slightly more hawkish view on rates. Expect to be bored senseless as every analyst on the street now gives us their two cents worth on whether this will actually move the market one way or another.
The adverts are flowing thick and fast at the moment. Spy’s photographers have found a raft of new ones in Singapore and Hong Kong.
Franklin Templeton is trying to influence the residents of Marina Bay Financial Centre in Singapore:
In Hong Kong, Investec Asset Management is promoting its Asian and all China equity funds, telling MTR riders to “Stay ahead in Asia with Investec”. The firm’s strutting zebra has been upstaged by the dragon kite:
Also in Hong Kong, Jupiter is back pushing the Dynamic Bond Fund:
Until next week…
P.S. Hats off to Singapore’s fund selectors! They correctly guessed Lewis Hamilton would win the SG F1.
