Spy was indulging in one of Italy’s joyous sins this week. Not a vintage Barolo or Chianti – but the far more transgressive Burrata cheese. This cream-filled variety of mozzarella from Murgia in Southern Italy is the devil’s own answer to cardiologists. That was not the only cheesy thing on the menu however, as Spy’s world-weary private banker companion was having a dig at his own profession with a string of old jokes: “Bankers never die. They just lose interest” was followed by “The definition of a banker? Just a pawnbroker with a manicure.” Still, cheese or not..many a true word said in jest, thinks Spy?
News has reached Spy that investment director Simon Grose-Hodge has stepped down from single family office, Mornington, which is based in Singapore. Although Spy is not aware of where Simon is moving to, he is expected to remain within the industry. Simon was previously with LGT Private Bank as head of investment advisory.
Mirae has lost a member of its communications team in Hong Kong this week. Theresa Yu, who was senior manager for corporate communications, has stepped down from the Korean asset manager. Spy is not aware of where she is moving to. Mirae has had a stunning year with its Asia Great Consumer Equity fund, which is up nearly 50% in the last year.
Spy suspects that the thinking at Asian private banks has not changed much. If you want to grow, add more RMs. That has been the model for 20 years and not much has changed. Not so fast, whispers DBS Private Bank, with its nearly 300 RMs in the region and approximately $10bn in fund assets. Spy overheard a conversation this week that suggested DBS PB is going to grow tech, not headcount. Apparently DBS is spending more money than ever improving the digital experience of clients and is “all about boosting assets per client, with better tech – not more RMs.” For Spy’s money, this is smart thinking even if it is unlikely to add to bragging rights at the annual PB black tie dinners…
FSA has been talking ESG all week with Forums in Hong Kong and Singapore. What did Spy learn? 1) There is an incredible appetite to boost knowledge of ESG from the wealth industry and most of the fund selectors and analysts who attended agreed a shift in sentiment was coming. 2) ESG is only really interesting for Asian investors if it is combined with good performance. No surprise there! And, 3) In Hong Kong, the majority of attendees polled told FSA that in their own personal investments, ESG counts for nothing – yet. At least they were honest.
Simon Coxeter, who is responsible for evaluating mixed-asset and equity strategies at Mercer in Singapore, estimates that only 10% of all the mixed-asset funds Mercer reviews globally are given a favourable rating, heard Spy. “We tend to set a high bar for mixed-asset,” he said, adding that the problem is most are just following a simple 60/40 bonds/equities-type approach, even though they call themselves mixed- or multi-asset. The great multi-asset window dressing competition is in full swing, thinks Spy.
Almost everyone Spy talks to of late is suggesting that thematic funds are the way to go for 2018 and beyond. Thematic ideas are bubbling up everywhere: artificial intelligence, robotics, water, food security, etc. etc. Spy finds many of these ideas compelling. A salutary reminder though, if it is needed, that a good idea is not enough. One wealth manager Spy spoke to this week lamented the fact that Amundi’s Asian Silver Age Fund, which was designed to profit from Asia’s rapidly ageing population, was pulled almost as rapidly as it was launched. The fund clearly did not raise enough assets and made a humble exit in just a few years. The lesson? A good theme is not enough to guarantee longevity or AUM.
Singapore has lost another wealth manager this week, notes Spy. FSA’s sister publication International Adviser, reports that Nexus is exiting the Lion City. Nexus was born out of the exit of Zurich Life in Singapore and began life with nearly 200 RMs. Challenges and competition in the local market seems to have taken their toll on the Dubai-headquartered firm and it confirmed its decision to close its doors. With Singapore’s apparent reluctance to give out new financial advisory licences, Spy wonders whether Nexus will manage to sell the license or hand it back with no new entrant taking its place?
Spy remains supremely sceptical about artificial intelligence living up to its promises in the near future. This week, the market appeared to bear out what Spy has privately believed for some time. -funds using AI are just as prone to mistakes as those using old fashioned ‘I’. Zerohedge reports, “This week, Eurekahedge released its monthly hedge fund indices for February, including its AI Hedge Fund Index that tracks 15 hedge funds that use artificial intelligence and machine learning for their trading decisions. The AI Hedge Fund Index plunged 7.3% in February from January, its worst month ever. It’s down 5.5% for the first two months this year, when the S&P 500 index was up 1.5%. But in 2017, when the S&P 500 index rose nearly 20%, the AI and machine learning luminaries were able to cobble together a return of 9.9%.” Stellar! First Trust is clearly a believer, though. In Feb it launched the First Trust Artificial Intelligence and Robotics ETF…
Fans of fantasy author Terry Pratchet, of whom Spy can be safely included, know that in his madcap Discworld series, the most feared of all the gods is “The Lady”, as in ‘lady luck’. Pratchett knew that luck played a bigger role in human affairs than most are willing to acknowledge and wittily wrote about it in his many books. Spy was amused to read this week, in an article worth reading in full on the Collaborative Fund blog, a good reminder that investors seldom give The Lady much credit either.
“In investing, a huge amount of effort goes into identifying and managing risk. But so little effort goes into doing the same for luck. Investors hire risk managers; no one wants a luck consultant. Companies are required to disclose risks in their annual report; they’re not required to disclose lucky breaks that may have led to previous success. There are risk-adjusted returns, never luck-adjusted returns.” Nailed it, or perhaps just lucky that regulators have not been reading much Pratchett?
Trump has got himself a new economic adviser, Lawrence Kudlow, notes Spy. The Wall Street Journal is crowing that Kudlow wrote in a note in December 2007, “There’s no recession coming” just as the US entered the worst recession since the Great Depression. Spy thinks the Journal is being a tad unfair: Wall Street had more cheerleaders in 2007 than all college football teams combined. Hindsight is a glorious thing and smugness a bit of an ugly trait.
Until next week…
