Posted inFSA Spy

The FSA Spy market buzz – 1 September 2023

GSAWM is hiring, UBS’s ex China ETF, Morningstar’s gloomy message on fund fees, Vanguard’s persistence, the Bitcoin spot futures battle rages, earnings powerhouses, chaos and creativity and much more.

With the world appearing in more turmoil, chaos and flux than usual, Spy was a reminded of Graham Greene’s great insight, as spoken in the film, The Third Man, by an emerging markets portfolio manager this week. “In Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace – and what did that produce? The cuckoo clock.” Perhaps a little chaos ultimately leads to greater creativity. Be careful what you wish for.

Spy spotted a new job posting that Goldman Sachs Asset & Wealth Management has released into the Singapore market this week. The asset manager is boosting its headcount in the private credit space. The firm points out that GSAWM Private Credit is one of the world’s largest alternative credit investing platforms with approximately $100bn of AUM and investment professionals based in the US, Europe, Asia and Australia. The manager is looking for an associate to “support investment ideas across the product suite of credit via early engagement with relevant parties and communicate and defend investment theses to internal stakeholders and committees, including the private credit investment committee”, among other responsibilities.

With sentiment towards China’s economic growth falling into a ravine of late, it does not surprise Spy one tiny bit that strategies are emerging with the explicit opportunity to invest “ex-China.” For European investors, UBS Asset Management has just added the UBS LUX FS MSCI Emerging Markets ex China UCITS ETF to a range of exchanges in Europe. The ETF tracks the MSCI Emerging Markets ex-China Index which consists of large- and mid-cap companies within 23 developing economies, excluding China. By removing China from the core MSCI Emerging Markets Index, which currently has a weight of 30.7%, the strategy dramatically changes its underlying emerging markets weightings. Taiwan has the largest allocation of 21.3% and then India with 20.5%.

Morningstar could have this press release on auto-release as far as Spy is concerned. The ratings and management firm indicated this week that, once again, fees across the board for mutual funds and ETFs continued to fall in the US last year. The asset-weighted average expense ratio for mutual funds and exchange-traded funds dropped to 37bp last year from 40bp in 2021. The ratio was 90bp in 2003, according to a recently published Morningstar report. The asset-weighted average expense ratio for actively-managed funds and share classes declined to 59bp last year from 61bp in 2021, driven mainly by large net outflows from expensive funds and share classes. Between 2003 and 2022, the cheapest 20% of funds reported positive inflows every year. In eight of the nine years ending in 2022, the other 80% of funds experienced outflows.

Spy has always been a sucker for a pithy line. Therefore, hat tip to Vanguard this week. A dynamic infographic showing the long-term performance of $10,000 invested between 1992 and 2022 showed a 16x return if one had the stomach to endure the bust, the 2008 crisis and numerous wobbles in between. As they put it, “Persist while others quit”. This applies to so many things in life and has the benefit of being highly rewarding.

The politics surrounding the listing of a Bitcoin ETF in the US rumbles on. This week Grayscale won a court battle against the regulator and the court declared that the SEC’s treatment of futures versus spot Bitcoin products was essentially arbitrary and unfair. The SEC could not adequately explain its rationale for denying spot bitcoin products. Invesco, which is also keen on launching its own Bitcoin ETF, reckoned it was a “milestone”. The market does not reckon the battle is over yet. The pop Bitcoin received after the ruling has but been erased rather quickly.

Who makes the most revenue per minute? Spy came across this delightful list this week:

Amazon: $1.04m per minute

Apple: $631,173 per minute

Alphabet: $575,617 per minute

Microsoft: $443,642 per minute

Samsung: $351,667 per minute

Meta: $246,914 per minute

Tesla: $192,361 per minute

Nvidia: $104,244 per minute

Special mention, Salesforce. Salesforce’s revenue in 2001: $5.4m. Today: $5.4m in less than two hours.

Perhaps being forced to buy Credit Suisse will turn out to be not such a bad thing at all. UBS reported a record profit of $29bn. This is mostly related to goodwill but still a rather juicy number.

Spy’s quote of the week is an anonymous one. “If at first you don’t succeed, call it Version 1.0” Spy is not too sure wealth management clients would like a Version 1.0 of their portfolio, but perhaps worth a try if it all goes pear shaped.

Until next week…

Part of the Mark Allen Group.