Spy was treated to an Armagnac of exceptional quality this week by a French banker of exquisite taste who knew his brandy as much as he knew the minutiae of portfolio construction. It was not, however, the vintages from the foothills of the Pyrenees that were occupying us – but the current state of the ESG market in Asia. For if there is one thing French asset and wealth managers are pushing, it is ESG. “It has been a bit slow, for sure, but the tide is turning as the story drips down. Really rich families are talking more and more about it and finally putting some ‘argent’ to work” was the message Spy heard by the fourth glass. Could 2019 finally be the year of ESG in Asia? Spy will drink to that and it does not have to be a vintage.
News reaches Spy that Franklin Templeton has lost one of its portfolio managers and regional heads. Apparently, Sumetha Lewchalermwong has stepped down from his role as FTI’s country head of Thailand. He helped manage various Thai equity strategies. There is no news yet who has replaced Sumetha. Franklin Templeton was one of the early western asset management firms to enter the Thai market and has had a presence in the country for many years. The Franklin technology fund has had a tremendous 12 months, up a healthy 12%.
Spy usually reports on industry moves within asset and wealth managers. Today he tips his hat to a colleague, Flora Leung, who is leaving for an entrepreneurial role of her own. The Fund Selector Asia office will not be as smooth an operation without her. Best of luck, Flora, you shall be missed, especially your frequent photo skills. Flora could spot an asset management advert at 1,000 paces, on the side of a speeding bus, on a dark night, entering a poorly lit tunnel. – and still get out her phone in time. Skills indeed.
It is the 1st of March so Spy whipped out his fact file, of sorts, for a tally of the year-to-date returns. Not bad for markets that were heading for a bunker in December as if the nuclear apocalypse was coming.
| S&P 500: +11% | Shanghai Composite: 18.09% | ||
| Dow: +11% | Crude Oil: +25% | ||
| Nasdaq 100: +12% | Gold: +3% | ||
| Russell 2000: +17% | US Junk Bonds: +6% | ||
| MSCI EM: +9% | US Aggregate Bonds: +1% | ||
| MSCI World: +10% | Volatility $VIX: -42% | ||
With expansion of the weighting of China A-shares into the MSCI indices, Spy has been flooded by commentary from asset managers. Unsurprisingly, not a single one has a bad thing to say about the new weightings. “Good news”, “Positive for the markets” and other such warm words have arrived from Blackrock, Harvest, East Capital, T Rowe Price and others. The flood of extra money should help propel the Chinese equity markets higher on the back of an already strong start – and give every banker a reason to keep on talking about the China story. Spy himself has no doubt it is good thing, but is not sure that the increased weighting makes corporate governance any better on the mainland. China still represents the great “active” investment opportunity across the world. Under-researched companies, with varying governance track records, are fertile ground for stock pickers. Caveat emptor remains the mantra of the day on the mainland as it does in India and much of the general emerging markets world.
The notoriously stingy, or prudent, depending on your point of view, government of Hong Kong has opened its purse and dished out some cash to its long suffering citizens. The recent budget was a veritable smorgasbord of giveaways. The government has clearly decided everybody needed cheering up: the HKD 20,000 (max) tax rebate dished out, might even end up in a mutual fund or two…knowing Hong Kongers’ enthusiasm for saving.
Has anyone walked up to you in a bar of late and whispered, “Private Assets…wanna buy some?” Well, perhaps Spy exaggerates a little bit but it has rather felt like that in the market place for the last few months. Every manager Spy speaks to believes the market demand for “off-market” opportunities is going to explode even further than it has already done so. Property, private equity, private debt, wine, art, watches and much more. No doubt the returns have been rather juicy in the private space. However, Spy wonders whether those returns have been juicy because they are less liquid and by definition have time to mature properly, or whether the listed markets have been too efficient for their own good?
Spy notes that Man, the asset manager, has given up its sponsorship of the annual Booker Prize – arguably the leading literary prize for novels written in English. With the judges of the Booker often going for notoriously miserable titles, Spy is not too sure that the end of the association is an entirely bad one for Man’s brand. Global equity managers probably need a little more enthusiasm in their life than do angst-ridden, rather tortured authors. Crankstart, the charitable foundation of Sequoia Capital partner, Sir Michael Moritz, is apparently taking over the sponsorship of the prize.
Housing bubbles around the world seem to be popping. Down in Australia the air is deflating from that whopping bubble with a veritable whizzing sound. Much blame is being heaped on new government rules about affordability criteria and restricting interest-only mortgages. Another factor seems to be a sudden absence of Chinese money. The once hot “Hong Kong – Sydney – Melbourne” property tour has rather fallen out of favour of late, hears Spy. Hong Kongers like a bit of luck and for once Down Under is not feeling like the lucky country. Still, every time Spy hears a property agent sigh, he spots an opportunity for an RM to talk about mutual funds instead. Always a silver lining.
Spy’s quote of the week comes that well of pithy wisdom, Twitter. “Blaming gold for a financial crisis is like blaming the thermometer for it being hot in Singapore in the summer time. The real cause of any crisis is going to be unconstrained government debt.” Quite.
Last weekend saw Warren Buffet publish his eagerly anticipated annual shareholder newsletter for Berkshire Hathaway loyalists. With Kraft, a major BH holding, having taken a near 30% beating last Friday, Spy was thinking of the appropriate aphorism. Not egg on face, but ketchup on a white shirt, perhaps? Still, Buffet will keep on getting quoted in all too many fund presentations, even if some of his lines are cheesier than a Kraft sandwich slice. Some investors are forgiven quicker and forgiven longer than others.
Spy’s trusty band of roving photographers have spotted some advertising. First up in Singapore, Legg Mason’s branding campaign for its various boutiques has gone underground. Well, in the Raffles Place underground:
Amundi has been spotted promoting active bond funds. Seeing the rollerblades in the image, Spy’s initial thoughts were of grazed knees, girls with perms and cheesy 80s Californian films. Perhaps Spy is showing his age.
Until next week…
