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The FSA Spy market buzz – 02 August 2019

Investec Wealth loses, Axa IM gains, HSBC Private Bank hires; the SFC and DD; Franklin Templeton’s ETF hedge fund; Fund selector success; Fraudulent bonds; advertising from Schroders and much more.

Spy has been sheltering from heavy weather in Hong Kong this week. Typhoon Wipha gave the city a much needed drenching and The Observatory hoisted signal 8, allowing all and sundry to draw their breath after a few restless weeks. Most people scuttled to safety back home leaving Central blissfully quiet for a few hours. Spy, of course, took the opportunity to join a UK-based portfolio manager at the Chinnery in the Mandarin Oriental for several drams of Bruichladdie at a suitably early hour in the afternoon. The portfolio manager joked that he had left Brexit chaos, only to find himself in Hong Kong chaos, and he was not just referring to the rain. Not that one would know it from the calm of the Chinnery where life carries on as if nothing in the world matters. Spy will drink to that. Thrice in fact.

News has reached Spy that Investec Wealth Management in Hong Kong has lost its investment director, Jonathan Sleath. Spy understands that Jonathan stepped down at the end of July and is due to join another firm in Hong Kong relatively soon. Investec is in the process of splitting itself with the asset management arm becoming separate from the bank. Spy understands the iconic Zebra, around which the firm has built its brand, will not be used indefinitely by the independent asset management arm after the de-merger.

Spy has learned that Wendy Loke, the former head of marketing for Southeast Asia at Pimco, has resurfaced. Wendy has joined French asset management, Axa IM as their head of marketing and communications in Asia-Pacific ex-Japan. Wendy is based in the firm’s Hong Kong office. She replaces Monique Inge who has returned to France. Axa IM has had success in the last year with its Framlington American Growth Fund, up more than 9%.

HSBC Private Bank has pinched a senior banker in Hong Kong from Swiss rival, Credit Suisse. Andrew Lau has joined the Hong Kong bank as a managing director. This is a return to HSBC for Andrew as he was previously investment councillor head, according to his LinkedIn profile.

Has the SFC in Hong Kong hatched a cunning plan to make sure that fund selection teams do not de-camp to Singapore? Spy certainly thinks so. Speaking to fund selectors this week, Spy was told repeatedly that since July 1st, the SFC is requiring all funds sold in Hong Kong to have gone through a formal due diligence process – in Hong Kong. In other words, a fund on a private bank’s platform that was approved in say, London, Geneva or Singapore, will nonetheless, still require official due diligence in Hong Kong to ensure the fund conforms to the bank’s local risk rating. As Spy understands it, if a fund happens to be rated 4 for riskiness in London the SFC won’t simply accept this and wants a local due diligence person to sign off the local rating. Spy asked one fund selector if this was just a box-ticking exercise and the response was, “Sadly not. We have to do it properly and thoroughly for audit.” What can Spy say, except that the SFC seems awfully keen to protect HNWI’s from their riskier instincts…

The ETF structure has proven remarkably versatile. Spy is sure many consumers still think of ETFs as large cap index trackers – S&P 500 springs to mind. But boundaries have been pushed further and further as more and more exotic strategies are included in ETFs. Themed ETFs cover Catholic values, marijuana, cancer cures, gender diversity, and so on. But this week, some new territory: Franklin Templeton has effectively filed to launch an ETF that looks just like a hedge fund to Spy. The fund will not only include multiple assets –bonds, equities, currencies and commodities – but also, and here is the kicker,: have the ability to go short as well as long in the half of the fund dedicated to equities. Assuming the fund gets approved it will be named: the Franklin Liberty Systematic Style Premia ETF. Brave new world.

It is results time of the year and listed asset managers are revealing the challenges of H1. In the paradox of our current markets, most are reporting higher AUM but net outflows, especially from their equity divisions. Schroders followed Amundi this week reporting net outflows of £1.2bn and €12bn respectively. Schroders is hardly taking things lying down. According to its statement, the firm has been actively buying: a wealth manager in Singapore and impact investment specialists in Switzerland. The firm also increased investment in China. With a net profit of £340m for H1 and assets up 9% to £444.1bn the British firm seems to be riding out the current market storm with its usual élan.

What is an award worth? Spy’s editorial colleagues have written an intriguing research piece showing that FSA’s Fund Awards held earlier in the year (which rely on the industry’s fund selectors) have done a remarkable job of predicting which funds will outperform in 2019. You can read the full piece here. Spy would like to give a hat tip to all the selectors who helped choose the winners from a competitive field, top job!

This week, Spy was sent an enticing offer to invest in a juicy, low-risk bond scheme promising to return a delightful 14% p.a. with quarterly pay-outs thrown in. The firm in question had a website so shiny, if it was a suit, it would be 100% of nylon and in risk of going up in flames. The entire thing smacks of fraud to an old hand such as Spy and yet, sadly, he knows all too well gullible and desperate consumers will willingly hand over their hard won dollars and cents in the blind hope of those exceptional returns. Spy heard, only this week, of an experienced portfolio manager who was enticed to give out his OTP resulting in a $5000 credit card fraud. Be careful out there folks…it is a callous world. And Spy is not just referring to central bankers, who seem to hate savers, too.

Spy’s photographers have spotted a Schroders campaign in Central station. The firm is promoting the value of dividend-paying investments in an uncertain environment:



Until next week…

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