The FSA Spy market buzz – 9 February 2018

Are times really that tough? Spy was on a plane to Manila this week, sitting in his usual cramped, economy class berth on Cathay when he discovered the person sitting next to him was an illustrious private banker. This startling bit of news was only discovered when Spy and said person both asked the hostess for a brandy which lead to lively conversation of the relative merits of Cognac versus Armagnac. Spy is an Armagnac person, especially preferring the Colombard grape varietals – should you wish to know. It was not grape gossip that made Spy’s ears prick up, however. It was the news that there is some quiet panic taking place in the PBs of Hong Kong and Singapore about rising interest rates and what that will do to all the leveraged fund trades the industry has thrived on for the last few years. Those juicy 4x bond fund and 3x equity fund deals may disappear like dew in the morning sun, let alone affect performance within the funds, mused Spy’s new brandy-loving friend.

News reaches Spy that Guillaume Wehry, the former head of marketing for APAC at Amundi in Hong Kong, has joined BNP Paribas Asset Management as their new chief marketing officer. Guillaume swapped Pacific Place 3 for Exchange Square and took up the role on the 1^st of February. There is no news from Amundi about a replacement for Guillaume. BNP Paribas AM has had good success with its Disruptive Technology Fund over the last year – up about 35%.

If Spy’s sources are correct, Peter Williams, who was handling sales of structured solutions for Leonteq in Singapore, has stepped down from his role. The business that calls itself a “Swiss financial engine” has had a challenging 2017 with several senior people exiting the business including its CEO.

There has been much debate and many questions asked in the Asian wholesale fund space about why alternatives, even liquid alternatives, have not sold very well in the last few years. Spy was given some pithy answers this week by a senior wealth manager, who has just left a tier one shop to go to a multi-family office. “Well, performance for the most part has sucked, but the real reason is that a lot of the banks simply don’t allow an alternative fund to be leveraged up.” And when you put it like that, the penny begins to drop, doesn’t it?

Although the recent volatility must be giving a few portfolio managers some grey hairs, Spy would imagine there are others who relish the pullback. Magnus Spence, head of alternatives at Jupiter, who spoke at FSA’s Alts forum last year, springs to mind. At the time he warned the audience with passion that the volatility was coming, a bit like a harsh winter. Aberdeen Standard’s GARS team and Aviva Investors’ AIMS team may also have a wry smile, being vindicated on the deeply defensive nature of those multi-asset strategies. Frustrated managers, who have never loved the rally, believing it was a central bank-fuelled party, will be waiting to pounce from their cash-laden side-lines. Now the tricky bit is to catch that falling knife.

Quote of the week, from Warren Buffet: “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.”

Standard Chartered in Singapore did its quarterly reshuffle of focus funds and Spy has spotted a few new names that have been added in and few that have dropped off for Q1 of 2018.  SC usually publishes its quarterly recommendations mid quarter:

Spy expects to see more thematic funds appear on the buy lists in 2018. With the Republican “big handout” for infrastructure possibly being signed this week, don’t be surprised if asset managers are quick to piggyback on the theme.

Spy only has anecdotal evidence, but it seems to be the case that whenever any financial market gets closer to a top, one can almost guarantee that the one word you will start to hear more frequently is ‘guarantee’. Products that guarantee returns or protection of capital proliferate as the structurers make outlandish claims based on the recent rallies. For what it is worth, Spy has seen more than his fair share of these ideas come across his desk of late, with certain Swiss private banks appearing to be a lot more active than others.

Every now and then a stroke of marketing genius comes along and one wonders why it was never done before and how one can replicate the idea. According to this report on Fox News (don’t shoot the messenger) a young girl has made a small fortune selling more than 300 boxes of cookies, brownies and other “munchie-friendly snacks” in just a few hours outside a marijuana dispensary in San Diego California. Spy has been wondering what the equivalent for financial services is in Asia and then he remembered that, of course, there is a reason bars spring up so plentifully around big banks…with volatility picking up, Spy expects those bar tills to be ringing loud and clear.

New advertising has been in spotted in Hong Kong in the last week. Usually you don’t see an advert on a bus for ages and then two come along at once…

JP Morgan Asset Management is promoting its China Income Fund with some Koi, just in time for Chinese New Year.

Pictet is pushing their Multi Asset Income Fund, highlighting that it is actually domiciled in (unseasonably cold) Hong Kong. Slowly, but surely, Hong Kong is picking up more and more funds that choose the Chinese city as their home:

Until next week…