Posted inFSA Spy

The FSA Spy market buzz – 17 March 2017

HSBC moves; AMP gets ethical; Concentrate or die; Invesco fixed maturity; DBS’s good call; Benchmarking dilemmas; EFG is coy; Nikko’s tissues; Samsung AM’s taxis and much more.



“You are going to organise a party on a private plane that simply takes off from Hong Kong and flies around and lands in Hong Kong?” asked Spy, with jaded credulity. “Oh yes, it is going to be very exclusive. We are serving the best champagne – only about 50 guests. All of them beautiful and very rich”, replied my young, pneumatic and over-excited companion in a passing conversation held in an overpriced bar in Lan Kwai Fong this week. If anyone doubts that the Good Times are returning, this silly idea should disabuse them. Apparently, hosting parties on a plane, are “a thing” and the aforementioned rich and beautiful of China and Hong Kong are sold on them because drinking with the hoi polloi at the Mandarin Oriental or Four Seasons is so last year. Spy’s advice, stock up on a fund that has exposure to Richemont, LVMH and Burberry – he reckons their profits may be about to soar again.

News reaches Spy that Colin Jelley has moved this week from London to Hong Kong to take up the role of global head of sales & distribution, HNW for HSBC Retail Banking and Wealth Management. Colin was previously with Old Mutual Wealth in various roles including head of wealth planning. HSBC announced earlier this week that Mark Tucker, currently the CEO of AIA is taking over as chairman of the group in September. His first order of business may be to look at his CEO’s tax affairs, as news has broken this morning that Her Majesty’s Revenue and Customs is still not entirely convinced that Stuart Gulliver’s domicile arrangements are 100% kosher.

The socially-responsible investing juggernaut is gathering pace, reckons Spy. AMP Capital Investors, the Australian fund management giant, is halting investments in tobacco, landmine and cluster munitions manufacturers. AMP CI’s CEO, Adam Tindall, was quoted by Bloomberg as saying, “We are not prepared to deliver investment returns to customers at any cost to society.” Very admirable and hardly something Spy can disagree with. However, the SRI challenge for any asset manager is deciding on where to draw the line. Almost ALL big business is guilty, to a greater or lesser extent, of exploiting its scale advantages and practising unethical behaviour in some form to reap higher profits. The examples chosen by AMP CI would seem straight forward – blowing up people is not nice. However, what about the supermarket that pays farmers on very poor terms or the bank that charges interest that would make a loan shark blush? The investing universe is going to get a whole lot smaller if one is too high minded thinks Spy

In the battle against passives, active managers have two weapons: high conviction concentrated portfolios and a ditching of the benchmark itself. The chatter from portfolio managers Spy has spoken to of late is that both equity and bond funds are going to be getting a whole lot more selective and that benchmarks are going to be tossed out the window. Spy is all in favour of active taking some greater risk to deliver the alpha it has always promised, but he foresees a few problems in the distribution phase with the latter. If Spy was a fly on the wall at a fund selector/portfolio manager meeting, he thinks the conversation might go like this:

Fund Selector: Why should I not just buy the passive product? Performance has been great and the fees are low.

Portfolio Manager: You could, but you would only ever get the benchmark return. My ‘Hyper Concentrated, Total Conviction, Genius Stock Selected Fund’ should deliver extraordinary returns if our outlook is correct. Why settle for ordinary? After all, you’re worth it!

Fund Selector: Okay, sounds good. What is the benchmark?

Portfolio Manager: Oh, we ditched the benchmark entirely to give us total investing freedom and our investors better returns.

Fund Selector: Umm, but then I don’t know which bucket to put this in….(long pause)…I think I will just stick with the well-known, but moderate performing, benchmark-hugging strategy that can tick one of the asset allocation boxes I have on my nice form here. See you next year…

Spy has often been accused of being of “fixed maturity” by the Domestic Commander-in-Chief, about the maturity of a 16-year-old, she quips. Perhaps the joke is on her as it seems that fixed maturity is all the rage. Invesco seems to have scored big, raising more than the magical $1bn mark with Bank of Singapore with its fixed maturity offering. Meanwhile, AB and Julius Baer have also had a good run, although chatter suggests that not quite as much was raised as the Invesco/BoS combo. Such is the buying habit of the wealth management community that Spy expects almost any form of fixed income is soon going to be offered in the region in a ‘fixed maturity solution’. It would not surprise your jaded Spy if zero-duration products are bundled into fixed maturity wrappers just to get some attention.

Spy thinks DBS customers who followed its asset allocation call for its model aggressive portfolio, published in January, will be feeling rather happy. The portfolio asked for more than 90% of the allocation to be in equities. That call is paying off, with equity markets racing ahead. Interestingly, the model has a very low allocation to alternatives and commodities – a call which so far has proven accurate.

EFG released its results this week and Spy read the summary so you don’t have to. Spy tips his hat to the authors who managed to use the most flowery language possible to explain a decrease in BSI’s expected acquisition value without once mentioning 1MDB. Standalone new assets for the group were only CHF 0.5bn with “market pressures in Asia” partly to blame. Since most other Swiss banks have reported extremely positive growth in Asia, Spy wonders what this market pressure is? Or was it a slip of the keyboard, and it should have read “regulator anger”… Still, EFG, with BSI, now has more than CHF155bn in AUM and no doubt will happily put 2016 behind it as it looks for sunnier days ahead.

Spy’s band of investigators report that tissue packs were being handed out at Singapore’s MRT with Nikko Asset Management’s new REIT ETF getting top billing. Spy can just imagine Lau Pa Sat’s tables acting as a veritable property marketing spread as Singaporeans “chope” their lunchtime places with their freebie packs:




Manulife IM has a new billboard in Hong Kong with a golden dragon promoting the Manulife Global Fund Dragon Growth Class AA (HKD):



Samsung Asset Management seems to be pulling out all the stops with its new Hong Kong-listed ETFs as marketing has been spotted in various media across the island. This one was just one of a number of taxis spotted this week:



Until next week…

Part of the Mark Allen Group.