Posted inFSA Spy

The FSA Spy market buzz – 09 September 2016

Schroders property hire; JP Morgan is searching; Nordea closes and opens; GSAM is raising; Duration matters; Julius Baer gets visionary and much more.

Spy found himself this week at a contemporary art exhibition in Sheung Wan, sipping Jacques Selosse Lieux-dits Collection Extra Brut Champagne, attempting to understand why naked, body-painted people photographed against lurid floral backgrounds were worth hundreds of thousands of dollars. In Spy’s humble opinion, the bankers and tai-pans gleefully snapping up the pieces were like central bankers buying dubious assets: woefully deluded that they would get their money back one day. Still, each to their own.

Spy hears that Schroders is expanding its direct property investment team in Asia. The British investment giant has hired John Chantrell for the newly-created role of “head of Asian real estate”. Schroders has a fairly substantial range of property funds and REITs and its Schroder ISF Asia Pacific Property Securities Fund is up 11.20% year-to-date.

Spy notes that JP Morgan Asset Management in Singapore is still hunting for a business development executive to help build out its Malaysian sales as it expands across Southeast Asia. Despite, or perhaps because of, Malaysia’s current political woes, offshore managers have been looking more closely at the market of late as fund distribution grows in the banking and insurance channels specifically.

Spy reads that Nordea, with its well-founded reputation for conservatism, has closed its giant Stable Return Strategy product, with nearly €18bn in assets, to new investment. The fund has done exceptionally well and been in vogue for the last year or two. Not to fear, a new version of the fund has launched immediately (fancy that!), overseen by the same team. It seems that fund managers are increasingly wary of letting funds grow too large. Performance suffers as security selection becomes more difficult with such large asset bases.

Goldman Sachs Asset Management has been successfully raising assets in its third-party retail and wholesale channels in Asia, hears Spy. Case in point: the GS Emerging Markets Equity Fund has grown assets from $300m at the end of 2015 to $1.27bn in early September. With a year-to-date return of 14.76%, Prashant Khemka, the fund’s Singapore-based pm, is clearly doing a great job of looking beyond the haze for opportunities.

It is that time of year when asset managers get on the road and some of the grandees from Europe and the US make their pilgrimage to Asia to share their views of the world. Spy hears that specialist JO Hambro will host its 4th Annual Investors Day in Singapore on the 28th of September and Jamie Hambro himself will be in town. Get in touch with Andrew Ang if you want to go along.

Julius Baer is doing its best to embrace Change, with a capital C. Its website modestly claims the bank and wealth manager is embracing visionary thinking. Spy felt himself seduced by the slick-looking imagery, redolent of a Luc Besson sci-fi film. The bank is boldly claiming it “dares to ask the major questions about topics that could potentially shape the world, our business and clients”. Spy is not 100% sure why simply asking the question is so daring, but is giving JB the benefit of the doubt because it looks so pretty. Perhaps, more importantly, Yves Bonzon, JB’s CIO, in his monthly outlook video thinks we are in a period of calm and moderation, which sounds fairly bullish to Spy.

Duration, duration, duration…is Spy going to hear any other words when speaking to fixed income managers? It seems everybody wants to be short duration in developed markets, believing the long end of the curve offers very little value. And, yet, Spy can’t help but feel that it is sometimes wishful thinking on the part of the bond masters. Europe looks awfully like Japan and Spy remains unconvinced that the US is really going to raise rates, despite their talking head puffery. Rate rises in this generation are a bit like the terrifying mythical beast, the Kraken: spoken about a lot more than seen.

So Super Mario Draghi, shocked absolutely nobody this week when he did not raise rates at the ECB. He and his band of merry men are going to continue purchasing €80bn of assets a month to keep stimulating the dead European horse and keep rates low for a long time. Lest anyone forget how massive this buying is, just think what you could do with that money. According to Spy’s research, with that cash, one could purchase: 935,817 Mercedes Benz S550s. Or, if you prefer speed over comfort: 340,489 Mclaren 570s supercars. Or perhaps, exclusive, ridiculously overpriced watches are your thing: 120,533 Greubel Forsey Invention Piece 2 Quadruple Tourbillons could be yours. Or perhaps you are jealous of your friends with a 100-meter superyacht? Even at a list price of approximately $275m each, you could buy 328 of them. And, you could make these purchases every single month. Central bank stimulus has reached ludicrous levels, thinks Spy, and nobody is terribly fussed.

Jupiter has been spotted in Hong Kong providing star-filled distractions at the tram stops:



Until next week! Stay away from expensive art exhibitions, unless someone else is picking up the bill…

Part of the Mark Allen Group.