The FSA Spy market buzz – 03 August 2018

Spy was commanded to have a dry week by his domestic commander-in-chief. Madame, in her wisdom, demanded a kind of drinks austerity. It seems it is not only central banks draining liquidity, it is coming alarmingly close to home, too. For Spy, however, a drink without the soothing balm of alcohol is like a speculative investment without leverage – he can’t quite see the point. Luckily, Spy managed to escape to a dingy bar in Kowloon with an industry colleague as keen on craft beer as he is. What this rather drunken evening concluded, was: if you are going to sell a fund in Asia, for goodness sake be optimistic. Asian buyers are not interested in wishy-washy stories. A bit like Spy’s drinks, make it a 6.5% Daas Blond ale, not a bottle of Little Fluffy Clouds (yes, really it exists, for shame) at a measly 3.5%.

Spy has discovered that Brad McCarthy, former managing director of Legg Mason’s EnTrust Permal unit, has joined Citibank in Singapore. Spy understands that Brad is now in charge of alternatives selection at Citi for the private bank. He is working with Julie Koo in Hong Kong who oversees the broader fund selection for the private bank. (On a side note, who needs naming rights? Building naming rights that is. On a recent visit to Hong Kong, Spy directed a taxi driver to Champion Tower, Three Garden Road in Hong Kong. This prompted a confused look from the driver. “Okay, try Citibank Tower please”. Citi’s building was renamed Champion Tower way back in 2016, but to all the world it is still Citibank Tower. The power of brand building, reckons Spy).

Choosing the funds, stocks or bonds that will perform best in the future is a tough job. This week Spy was examining DBS’s top ten performing funds, over the last three months, for its Treasures wealth division. Only three of the top ten performers are on their focus list of funds: Natixis’s Harris Associates US Equity, Legg Mason’s US Small Cap Opportunities and Franklin Templeton’s Technology fund. The rest are, Spy guesses, currently out of focus. Hats off to Franklin Templeton though. Four of DBS’s top ten are Franklin funds with, left-of-field, biotech, leading the pack:

Spy has learned that Man Investments, a British listed manager, is significantly ramping up its efforts in the Asian wholesale space alongside current efforts in institutional. A decade ago, Man had a reputation as a high octane alternatives manager which used quant and algo trading tools to manage some of its most high profile funds such as AHL. Post-GFC, which saw a period of under-performance, the business acquired or established a range of long-only propositions to complement its large alternatives range and bounced back. Man used to have a retail license in Singapore but that was handed back in favour of a more limited accredited distribution license. Spy now understands that Man is actively targeting private banks and high net worth wealth managers again. Man GLG’s Undervalued Assets Professional fund is up more than 10% in the last year.

Fidelity threw a cat among the pigeons this week, reducing some ETF fees to zero in the US. Spy understands that others, including Blackrock and HSBC Investments have already made that move for certain institutional clients, expecting to make money off advisory or other services. Is it any wonder that 1) ETFs are not “sold” much in Asia and 2) that private banks are desperate to get clients onto mandates?

Speaking to the market, Spy gets the distinct impression that fund selectors and chief investment officers at banks and wealth managers are desperately reading tea leaves or palms, consulting tarot card readers and gazing into hazy crystal balls. Why? Well none have much conviction on what the second half of the year looks like. 2018 has proven far less predictable than 2017 and there is very little consensus on where to put money to work. What is rising? Cash. Apparently cash is building up in client accounts waiting for the first solid indication of a sustainable trend. In the meantime, redemptions trickle in at a fairly steady and, worrying, pace.

There is no new thing under the sun, as the saying goes. Robo-advisors may be all the rage at the moment, however, Spy came across a reminder that as early as the 1980s, Japan was already pushing robo-advisors. Admittedly, this particular one may not have managed one’s money very creatively, but it had a distinct advantage – it could not lose your money, either. Unless, of course, your big sister pinched it. Saving money… it’s all child’s play. You can watch a video of the bank adviser in action here.

Spy’s photographers have spotted new advertising. First up is Lion Global Investors’ All Seasons Fund in Singapore. Spy is not 100% sure why the glass of water means it is most cost-advantageous?

An eagle-eye team member spotted this Nikko Asset Management advert for their SGD Investment Grade Corporate Bond ETF.

Until next week…