Posted inFSA Spy

The FSA Spy market buzz – 18 Dec 15

Normura AM hires a new MD; Columbia Threadneedle adds to its sales team; 2016 predictions from Franklin Templeton, JPM AM, Fidelity, BOAML and EFG; high-yield failure and much more.

Spy found himself in a grimy bar in Wanchai this week, which was decorated with tacky tinsel and cheap looking Christmas cheer.  It seemed fitting for a rotten end to the year. As he drowned some revolting, imitation glüwhein he conceded he was wrong on rates: the Fed has finally raised 25 bps and cemented Spy’s reputation as a better drinker than a forecaster. Still, looking over global fund performance in 2015, he at least finds himself in good company.

Nomura AM, the $350bn AUM manager, appears to be getting serious in building up its asset management business in Singapore. Spy hears that the Japanese manager has hired industry veteran Paul Hopkins, formerly of Barclays Capital and BNY Mellon, as a new managing director.

ColumbiaThreadneedle has beefed up its sales team with the hire of Amundi’s Dennis Quah. Dennis, who also had a stint at Schroders, was previously looking after private banks and wholesale sales at Amundi in Singapore.

Spy has been inundated with outlook predictions for 2016 from every asset manager under the sun, most of whom seem to be doing the economists’ trick of hedging their bets. Spy thinks forecasts are like sex: everybody is doing it, but is secretly worried they are not doing it right and certainly prefer not to have their performances compared afterwards. In no particular order, here is a smattering of views for the new year that caught Spy’s eye:

“The belief that inflation has become structurally lower has made some investors complacent on taking interest-rate risk, in what we believe is a dangerous part of the yield cycle”, writes Michael Hasenstab, CIO of Franklin Templeton’s global macro team.

Meanwhile, JP Morgan’s Multi-Asset team says, “We remain cautiously optimistic on risk assets, with a preference for developed markets…our underweights are cash, EM equities, Canadian bonds and the euro” and some vaguely positive news for bleeding commodities investors as they move “commodities from underweight to neutral”.

Fidelity’s viewpoints team thinks 2016 is all about a “ delicate balancing act between the Fed and the People’s Bank of China…and perhaps the best-case scenario is just an absence of bad news for a market that has learned always to be looking over its shoulder.” Whatever that means…

One strategist taking a decidedly more bearish view is Bank of America Merrill Lynch’s Michael Hartnett. He says the US central bank’s decision to hike is intended to normalize monetary policy but “the aftermath of the Fed’s move could be lots of selling in 2016 as investors eschew risky bets”.

What of 2015’s prediction, though? Hat tip to EFG AM’s forecast team as they suggested the following last December: gold weakness, positive outlook for Japan equities, ECB to restart QE and oil to remain weak, all of which has proven correct. So what are they saying for 2016? Fed rate to stay below 1%, commodities to stabilise, USD positive but only just, and emerging markets are due to bounce back.

Spy quoted Miton Optimal last week on complacency in High Yield. This past week that complacency was brought home in a Reuters report: “New York-based Third Avenue Management is blocking investors from withdrawing their money from a near $1bn junk bond fund as it tries to liquidate the fund in the biggest failure in the US mutual fund industry since the Primary Reserve Fund `broke the buck’ during the 2008 financial crisis.” With the Fed having hiked rates, junk yield assets are bound to feel the pressure. Spy thinks this is the canary in the coal mine.

Spy casts his eye over the performance of pure listed fund management companies for the last time this year. Top three performers, YTD: Jupiter up 37.58%, Henderson 54.37%, Magellan 67.16% and the three laggards: Invesco – 17.81%, Aberdeen -28.06%, North Star Asset Management -44.19%. By comparison, the Dow Jones U.S. Asset Managers Index is -13% YTD. No one said this fund management game was easy.

Spy thanks Schroders for their handy graphic looking at what the US equity market has done in the past after a rate hike. On average, it is good news.

Lastly, Spy notes that Chelsea have finally lost patience with Jose Mourinho and given him the boot yesterday. The Chosen One exits stage left and we are reminded that even the best will eventually fall. Celebrity hedgie and activist investor, Bill Ackman has had to write to clients and warn them that 2015 will probably be his worst ever year. Will his clients do an Abromovich in 2016?

Part of the Mark Allen Group.