Spy had the pleasure of a lazy lunch this week with a portfolio specialist from a large French asset manager. He is young, highly intelligent and a touch contrarian. “It is all about trust,” he told me, over a glass of white Burgundy. “The world does not trust each other anymore. The Americans, Chinese, Europeans, Brits – they are going through an orgy of mistrust. We are entering a period of peak distrust. And that is bad for politics and social cohesion, but great for active management.”
“Great for active management?”, replied your humble Spy. “Absolutely! Whenever there are periods of geopolitical rumblings, great fortunes are made. And it won’t be the passive investors who do it. It will be those looking in the shadows and in rocky chasms who will see opportunities.” Spy merely nodded and enjoyed the enthusiasm of youth.
Capital Group has made a new senior appointment, notes Spy. The American giant has pinched Alexandra Haggard from BlackRock to be its new head of product and investment services for Europe and Asia. Alexandra will continue to be based in London. She will be responsible for overseeing the strategy and expansion of investment services within the business and overseeing the product specialists and client analytics group. She previously held roles at Stamford Associates and Russell Investments. Capital Group has had success in the last twelve months with its European Growth and Income Fund which is up 21%.
This week OCBC’s RoboInvest announced that clients can now choose from 33 different robo-portfolios. Spy has no problem with choice, but can’t help but wonder if end clients really need quite as much choice. The selection now includes such groovy options, such as: China Growth, Gen-Z Winners, US Cloud Computing, Future World and Impact Investing. Spy, being Spy, was particularly ticked by a choice called “Yummy”. The portfolio “provides diversified exposure to selected stocks of well-known US companies that are primarily involved in food production – including snacks, fast food and non-alcoholic beverages.” Top constituents include McDonald’s and Pepsico. The portfolio’s risk level is rated “very high” – and that is not even taking into account the cholesterol.
Spy colleagues have been hosting their annual FSA Investment Forums in Hong Kong and Singapore this week. Fund selectors, analysts and investment specialists logged on for the webinar sessions with Franklin Templeton, Federated Hermes, Nordea and GAM. As usual, FSA conducted some polling. A touch tongue in cheek, perhaps, but when asked whether Trump would be re-elected in November, the more than 50 participants, were split down the middle. Thirty-eight percent said yes, 38% said no and 24% too close to call. Sadly, for the peripatetic among you, when asked when they next expected to fly from Hong Kong, 48% answered, “No idea” with only 14% expecting to fly by December. With the announcement that Singapore Airlines is cutting 20% of its workforce, the news for the travel industry just gets grimmer and grimmer.
Is it a hedge fund? Is it a central bank? Is it a giant money recycling machine? Ladies and gentleman, Spy presents the Swiss National Bank – equity investor extraordinaire. The bank now owns about $120bn of equities with a strong tech bias. In an effort to keep the value of the Swiss franc down, the central bank keeps on buying foreign stocks. Spy has been a long and frequent critic of central banks in general but surely even the most sympathetic observer must think the right place for this investment is in a sovereign wealth fund? With thanks to Holger Zschaepitz for the chart.
UBS has made ripples, if not exactly waves, this week, with a call for all private investors to get on board with sustainable portfolios. The bank has not shied away from sustainability in the last few years and has been an active, perhaps even, passionate proponent. It seems now, it has gone “all in”. The bank gave three reasons ESG topics should matter to investors. 1) Managing investment and portfolio risk. 2) Participating in the upside potential of disruptive innovation. Fair enough. However, it was number three that raised Spy’s eyebrow: 3) Engaging with the prevailing social and political agenda. With our highly politicised, noisy, fractious, culture war-like, activist, angry, protesting society – does UBS think it will allow its very wealthy clients to sleep more easily at night if they have a sustainable portfolio? Possibly.
Get out your popcorn. Goldman Sachs is warning clients who will listen that the Vix is sending some rather worrying signals. The Vix is rising when the stock market is also rising. That is unusual – it typically tends to fall during rising markets as people worry less. The last time it did this, it did not end well. It was the dot.com boom and crash when a similar pattern emerged. For those who need a reminder, when that bubble burst, the Nasdaq lost 77% of its value, wiping out a generation of investors and chasing day traders away from the market for twenty years. Spy would imagine the RobinHood crowd have barely heard of the Vix. By the time they understand it, it may be too late. Certainly, the volatility in the last ten days should be a healthy reminder that nothing goes up forever, not even Tesla.
At the end of August, it was Warren Buffett’s 90th birthday. The grand old man of investing was played some pretty big compliments by Bill Gates on his Gates Notes website and rightly so. Bill quotes Buffet on friendship, “Make some good friends, keep them for the rest of your life, but have them be people that you admire as well as like.” Spy could not help think this applies to companies too. Why ever invest in a company one does not admire, too?
Until next week…
