Posted inNewsFSA Spy

The FSA Spy market buzz – 03 April 2020

RWC hires a team; Lombard International’s new CEO; M&G has heart; Vanguard and Ant; Dividend hell; Robeco goes Baa; Hyperinflation and Weimar; and much more.

Not that Spy had many people to go out for a drink with as most people are social distancing, in lockdown, in quarantine, incommunicado, in limbo, or perhaps just plain in despair, but the Hong Kong government has finally closed the bars this week, too. Drink at home or don’t drink at all, seems to be the Covid mantra. How dull and tragic, but probably entirely necessary. Singapore seemed to have things under control and all of a sudden like the hydra, the many-headed serpent of Greek mythology, a new head appears just as soon as the old one gets lopped off. Beating Covid is not going to be easy. Spy is reminded, in all this pandemic reporting, of Alexander Pope’s line from 1709, “a little learning is a dangerous thing”. Never has so much been said by so many with so little understanding. If the first casualty of war is truth, the first casualty of an epidemic seems to be common sense. Wash your hands and stay home.

Spy noticed that RWC Partners, the investment boutique whose growth was backed with an investment from Schroders in 2010, has pinched an investment team from BNY Mellon. The team, including British City of London veteran Nick Clay, worked at BNY subsidiary Newton, running their Global Income Fund. Nick, who was with BNY for more than 20 years, and his co-manager, Andrew MacKirdy, will now head the global equity income division of RWC. They are joined by two other colleagues from Newton. RWC now has $18bn under management. Their funds are promoted in the region by Richard Howard, who is based in Singapore. Incidentally, RWC bought back the Schroders stake last year and is now fully independent again.

Lombard International, the insurance-linked wealth management platform, with activities in Asia, has appointed a new chief executive, notes Spy. The firm has hired Stuart Parkinson from HSBC to head up the Luxembourg-domiciled business, although Stuart himself will be based in London. Stuart held various positions with HSBC prior to Lombard, including most recently the role of global chief investment officer for the last five-and-a-half years, according to his Linked In profile. Lombard has nearly €50bn in AUM.

Under normal circumstance, Spy may just have been reporting some job changes at M&G, as the firm had indicated some changes were coming. However, in light of the Covid-19 pandemic, the manager has had a change of heart and sent an email to all staff this week indicating that no jobs will be reduced this year. John Foley, the listed group’s CEO, said in an email to their team, “Our next step to safeguard you is to reassure you on financial security.” Hat tip to the asset manager from Spy, as this heartening news rather flies in the face of the cheap media narrative about finance firms being ruthless and uncaring. M&G has more than 6,000 staff and has Asian offices in Australia, Hong Kong, South Korea, Japan and Singapore.

Many asset managers with aspirations in China many be looking very warily at an announcement made this week by Vanguard and Ant Financial. The firms officially announced their partnership. In their words: “Vanguard and Ant Financial announced a partnership to bring inclusive wealth management services to Chinese individual investors by combining the strengths of the two parties.” That announcement is a mere 25 words, thinks Spy, but a whole heap of competition. Some of the stats are staggering. Vanguard has more than $5.5trn in AUM and more than 30 million investors. Alipay, Ant Financial’s parent company, serves over 1.2bn users around the world. Expect to hear more of this phrase, “Help you Invest” (Bangnitou), which is the strapline the partnership has chosen.

Fancy a dividend? According to Janus Henderson, global divi payments hit $1.4trn last year. Income that investors of all stripes rather enjoyed receiving each quarter, no doubt. That is going to look very different by the end of 2020, thinks Spy. Dividends have been cut faster than ties with a lunatic ex-boyfriend in the era of The Virus. HSBC and Standard Chartered said last week that they will not pay dividends during all of 2020, shocking investors of the widely-held bank stocks who believed in the stability of the dividend payout. Firms have hunkered down into survival mode. Spy has been barely able to keep up with all the divi cuts but according to info from ICE Data Services, 500 companies globally cancelled their dividend in March. Spy would expect that number to quadruple before the end of April. The equity income sector is going to be a hard slog in the next 12 – 18 months. Dividends tend to recover far slower than earnings and having had this sudden slowdown, expect company boards to hoard cash for another rainy (or virus-filled) day.

Spy has barely been able to watch a financial news programme, read a financial blog from an asset manager or private bank that has not been speculating on the shape of the recovery. It is W, V, L, U or some other letter? Well, hat tip to Robeco for managing to think outside the, eh, alphabet. In a lively piece, worth reading, they write, “Just because our Western alphabet has been around since Etruscan times does not make its letters the best economic guide. The letters V and W, with their sharp bounces, and mean-reversion assumptions, seem to belong to a 1945-2007 world, a prior era compared to post-2008 structural trends. U seems to ignore ten years of lower growth and rates. The letter L seems more suited for Japan. We think 2020-21 growth trajectories are better described by the Arabic letter Baa’, in its final form. In an age of lower secular growth trends, low rates, older demographics and higher debt, the elongated horizontal sweeps of the Arabic alphabet seem a better fit than western equivalents.”



Wouldn’t it be great to be a central banker? You can sit in your office printing large quantities of money while other plebes have to actually work for a living to get their dollars, euros, pounds, yen or RMB. Spy has spotted a new way to describe this phenomenon: “Fed money printer go brrrrr.” Spy is not sure who the wit was that coined the phrase, but would love to buy them a drink. If, like Spy, you feel that printing trillions of dollars will not end well, try and pick up a copy of Adam Fergusson’s When Money Dies. It is a study of the Weimar Republic’s hyperinflation nightmare.



Until next week…

Part of the Mark Allen Group.