Posted inFSA Spy

The FSA Spy market buzz – 11 November 2022

EnTrust Global hires, M&G promotes, Dimensional’s sustainability exclusions, wisdom from Ninety-One, the markets go bananas, FTX collapse, art heaven, advertising and much more.
FSA Spy

With yesterday’s dramatic market moves (more about that below), Spy had two coffees and a lunch time drink meeting cancelled at the last minute today. Wealth managers, who have only been too happy to meet and chat, needed to be at their desks fielding calls galore from clients. Spy is wary of violent moves in the markets, but at least it was an up day for a change. The improved global interest rate outlook is most welcome. A slightly weaker US dollar, which has been crushing everything in its path for a year, will give us all some respite. Long may this change of sentiment last. Although Spy is not going “all in”.

News reaches Spy that Brian Sng has moved from BlueOrchard to EnTrust Global. Brian took up the role of managing director for international business development in October. New York-headquartered EnTrust has a diverse range of alternatives, hedge funds and private market strategies with about $18bn in AUM. Brian will continue to be based in Singapore. He has previously held roles at Federated Hermes, Fullerton and M&G. Spy has no news on Brian’s replacement at BlueOrchard.

M&G has announced an addition to its global listed infrastructure and global themes strategies. Nicholas Cunningham will become deputy fund manager in January working alongside lead manager, Alex Araujo. Nicholas, based in Hong Kong, has been focusing on Asian equites for M&G for the last three years or so. Meanwhile, Son Tung Nguyen, who joined M&G six years ago, has also been promoted to senior analyst, in recognition of his additional strategic responsibilities. M&G (Lux) Global Listed Infrastructure is up nearly 14% in the last 12 months.

Austin-headquartered Dimensional Fund Advisors has launched a trio of sustainability focused ETFs in New York. While this hardly warrants much of a mention, Spy was interested to see what exclusions had been included. Any firm with activities that are linked to “palm oil, coal, weapons, tobacco, private prisons and factory farming will not be eligible for inclusion in the portfolios”. Indonesian businesses must continue to fume at the thought of palm oil being lumped in with weapons and tobacco, while good old-fashioned oil gets a free pass. Spy can’t help but wonder if Texas’ recent noisiness against UBS, BlackRock, Jupiter et al, may have had something to do with this?

Speaking of which, Spy sends a massive hat-tip to Nazmeera Moola, Ninety One’s chief sustainability officer. She has pointed out this week that forcing companies to divest from polluting industries does not in fact reduce carbon emissions one iota. After all, someone else simply buys the company and it carries on polluting as before. She was referring to the activist-forced sale of Anglo American’s coal assets, which, as a separately listed company, have soared in value. Anglo’s investors have simply lost out and the world still has coal pollution galore.

“There are decades where nothing happens; and there are weeks where decades happen” said, Vladimir Ilyich Lenin. Yesterday sure felt like that in the markets. The S&P 500 gained 5.5%, its largest percentage increase since April 2020 and the 15th largest going back to 1950. Meanwhile, the Nasdaq 100 rocketed 7.5% in the largest gain since March 2020 as inflation eased. In another dramatic move, the Most Shorted Stocks index jumped a whopping 11%, in one of the most dramatic rallies ever. There was pain for some hedge funds on the back of this swing. Noble Absolute Return ETF (NOPE), run by veteran global macro hedge fund manager, George Noble, plunged almost 20% in one of the most extraordinary short squeezes on record.

And then of course, Spy can’t help but mention the turmoil affecting crypto broker, FTX. As that business teeters on the brink of collapse, rumours of fraud and a pyramid-style ponzi scheme are emerging in the related firm, Alameda Research. The CEO, Sam Bankman-Fried, was recently featured on the cover of several leading business magazines for being a crypto darling genius wonder-boy who has made billions. Yet another person cursed by the so-called ‘Time Magazine Cover Effect’? Spy was amused to see that he was recently quoted by Bloomberg Markets as saying he wants to give his billions away. Nailed it.

Is the exodus of western firms from China gathering pace? It came to light last week that Morningstar has quietly paid hundreds of staff severance packages and their roles have been moved to India, London, Madrid and back to the US. The job slashing is not expected to be completed until Q3 2023, according to Caixin. Apart from the usual comments about efficiencies, it is hard for Spy to fully understand why there is the need for such a dramatic redistribution of roles from the ratings and fund research company, unless hard lockdown was too much to bear.

With the American mid-term election result mired in counts and recounts, Spy thought it was interesting to note: the US equity market has never dropped during the third year of the US presidential cycle, which will occur this time round in 2023. True. However, it is also true that there has never been a recession in the third year, either. If a recession does occur in 2023, one long-held rule of market numerology lore may be broken.

A picture is worth a thousand words. In the case of the late Microsoft co-founder, Paul Allen, his pictures were worth a record $1.5bn at auction this week. The sale included works by Van Gogh, Cézanne, Seurat and O’Keeffe. The lesson? Uniqueness is always in demand and is a remarkable inflation hedge.

Spy’s photographers spotted a branding campaign by Natixis on the side of a tram in Hong Kong. This is part of a wider campaign that has been running in Singapore, too.

Until next week…

Part of Mark Allen.