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The FSA Spy market buzz – 08 August 2019

Small wealth managers; Aviva Investors results; Keeping it simple; Too many wars; City lessons; other musings and much more.

“It was the best of times, it was the worst of times.” Your humble Spy was in the mind of Charles Dickens this week. Specifically his classic A Tale of Two Cities. While Singapore celebrates its National Day today with the usual exuberant fanfare of fireworks and flummery, Hong Kong is experiencing a practically unprecedented crisis. Rather than fireworks lighting up the sky it is tear gas filling our streets. In Dickens’ bleak saga of ultimate sacrifice, it was Paris guillotining and London providing a refuge, just as Singapore is doing right now for the well-heeled of Canton. With Paris currently providing a European home for angry Brexit exiles, the tables turn once more. Similar to Paris eventually recovering from its monarchy crisis (well, crisis if you were the monarchy, as they kept on having their heads lopped off), Hong Kong will no doubt survive this bought of indigestion. Spy strongly suspects that, if only metaphorically, some heads will roll in Hong Kong, too, before this all calms down. It is only a question of whether it is the peasants, the royalty or a bit of both. Great cities endure, tumultuous periods do not. On the plus side, the protagonists may find themselves the subject of some dramatic musical performance 200 years in the future.  Do you hear the people sing?

Is it possible to be a small wealth manager and make money in this current environment? That was the question that was posed to Spy by the CEO of such a firm in Hong Kong this week. The CEO was gloomier than a snow crab in a Hong Kong restaurant on Shellfish Special Day. “The salaries, regulatory burden, rent and technology costs are simply too much. Anything less than $500m in assets under advice seems unviable nowadays,” he told Spy. Sell up or close up seems to be the current mantra for independent firms. That seems a crying shame to Spy, for if one has ever had the misfortune to be a small (aka unworthy) client at a large wealth management firm, the experience is usually worse than root canal treatment.

Active asset managers are sounding like broken records (does that metaphor even work in the Spotify era?) as they report H1 results. This week Aviva Investors added to the chorus of “AUM up, negative flows.” In AI’s case, AUM rose by £15.4 billion to a healthy £346.1bn with £5.5bn out the door and a further £3.5bn transferred to an external manager. Spy does note that these AUM rises for British firms are also being flattered by the extremely weak pound. Not the rosiest picture for the industry if one looks too closely.

Speaking to jaded fund selectors this week, Spy heard one firm name pop up several times. It seems to be making inroads into the Asian wholesale space: Twenty Four Asset Management, the London-based boutique owned by Vontobel Asset Management. Several fund selectors spoke in rather gushing terms about the firm’s bond strategies. As their website says, “We are an asset management company and we specialise in fixed income, nothing else.” Top marks for keeping it simple, Twenty Four AM.

Investors must have a lot of faith in Uber if they keep backing the stock after it lost $5.2bn on a mere $3.2bn of revenue in the last quarter. A rather impressive feat. It has now lost $6.2bn this year despite achieving 100 million monthly users. How many users will it actually take to start making a profit? For those still wanting to buy the Uber hype, Spy turns to Ancient Greek stoic philosopher, Epictetus: “It doesn’t take much to lose everything, just a little departure from reason. Buyer beware.

It is truly the changing of the guard. Bloomberg reports in a fascinating article that the European and US asset management industry has appointed 37 new CEOs since 2017. Their list does not include the latest change: HSBC Asset Management hiring Nicolas Moreau from DWS, bringing the total to 38; more than one per month, notes Spy.

Spy rather dislikes ‘isms’ of any sort. Throw an ism on the end of something and Spy usually rolls his eyes at the ill-nuanced generalisations that follow. However, this week, Spy has more than a dollop of sympathy for the world’s feminists who say, to anyone who will listen, that the entire world seems to have entered a giant willy-waving contest. Trade wars, Real wars, Brexit wars, Street wars, Kashmiri mountain wars, Currency wars, Twitter wars, CO2 wars, Active / Passive wars – all bores. Perhaps the world’s leaders should all take a long cold shower before rushing off to their next trade / peace / climate summit.

Majulah Singapura and until next week…

Part of the Mark Allen Group.