Posted inFSA Spy

The FSA Spy market buzz – 12 November 2021

A perma-bear quits; T Rowe’s Rivian remedy; Net zero gets official; VISE on the horizon; Fidelity’s growing pile; America’s rich; Book recommendation; Art and advertising; and much more.

Spy can remember an old market saying: “When the last bear finally throws in the towel, the bull market has reached its peak”. Those words rung out for Spy over a glass of modest Chianti last night with a colleague. Russell Clark, a so-called “perma-bear” portfolio manager, finally succumbed this week to the inevitable and has shut his London-based RC Global Fund that was hunting for bearish opportunities. The fund’s assets had dropped from a peak of $1.7bn to a modest $200m. Being bearish has been a mug’s game since the bottom of the financial crisis in 2009, despite occasional shudders. Spy is really not sure whether to toast to that or not.

Any idea on how to make $100bn with absolutely no sales? It seems to Spy the best thing to do is make a really snappy video of a new type of electric vehicle company and go for a much-hyped IPO. Yes, this week Rivian, the EV truck start-up, debuted on the US market to a frenzy. All those who missed out on Tesla seem highly excited to have another pop and are willing to buy the dream. The prospectus casually said they expect to generate total revenue of $0 to $1m in the next few quarters — what venture capital investors euphemistically call “pre-revenue”. Still, despite Spy’s cynicism he might just be willing to give Rivian the benefit of the doubt. Why? The second biggest investor after Amazon is in fact T Rowe Price, through various funds, and T Rowe has a stellar track record in this area…

Asset managers love an association or two – it makes everyone feel good. It seems the latest association band wagon is “net zero”. Welcome to the Net Zero Asset Managers initiative. Launched in December 2020 it “aims to galvanise the asset management industry to commit to a goal of net zero emissions”. The association already has 220 signatories managing $57trn in assets. The association has some very worthy goals that are comfortably far out into the future: 2050 All very impressive, thinks Spy. But the proof will be in the pudding. Let’s see how many of these managers continue to invest in big oil, supermarkets that supply read meat, aluminium manufacturers, paper firms that get their pulp from the Amazon, gas producers, etc, etc.

For decades, finance evolved relatively slowly but in the last decade, fintech has exploded and literally hundreds of new companies have popped up changing the way we do finance. Spy is keeping an eye on VISE – a New York firm founded in 2016 that is trying to do something utterly revolutionary in the asset and wealth management space. The firm claims its platform allows advisers “to build a customised portfolio in less than a minute” and each portfolio is tailored dynamically to a “client’s unique needs”. The key to this technology platform is that these dynamic portfolios avoid funds altogether. If ETFs gobbled market share from mutual funds, VISE is a possible ETF disruptor. The firm is backed by a roster of Silicon Valley grandees: Sequoia, Ribbit Capital, Founders Fund, Bling and Allen & Company. Get out the popcorn.

Fidelity Investments is having a good run. The company announced its results this week. Assets under management jumped a healthy 22% from a year ago and have hit $4.2tRn. Fidelity’s Emerging EMEA fund is up 55% and, much to Spy’s surprise, its dedicated France fund is up 55% too. Perhaps Spy’s French surprise is not worthy. According to Bain, luxury goods, of which French companies excel, have bounced back to pre-pandemic levels. In the US and China, high-end shoes, leather goods and jewellery sales are booming again. Luxury goods sales will hit about €283bn ($324bn) this year and keep growing at 4% ,according to Bain.

We had Adam Smith’s invisible hand, then we had Keynesian economics, then we had Milton Friedman’s free-market market economics. Now, if a new group are to be believed, we all need to get in on “doughnut economics”. According to the rather breathless website, “Doughnut Economics proposes an economic mindset that’s fit for the 21st century context and challenges. It’s not a set of policies and institutions, but rather a way of thinking that brings about the regenerative and distributive dynamics that this century calls for… The starting point of Doughnut Economics is to change the goal from endless GDP growth to thriving in the Doughnut.” Spy loves a Krispy Kreme as much as the next hack and looks forward to the Doughnut Thematic soon. You heard it here first, says Spy.

Fun fact for Friday. In 2013, America’s richest 400 citizens had $1.7trn in assets. In 2021, America’s richest 15 individuals, had $1.7trn in assets. That is about the same amount of money that the bottom 50% of Americans have, combined. That 50% is about 162m people. Therefore, they have about $10,500 each.

Speaking of trillions, if you are looking for some bedtime reading, you could do a lot worse than picking up a copy of Robin Wigglesworth’s new book about the growth of the passives industry. It is simply called “Trillions”. In asset management, the rise of the ETF has been the story of the last 30 years and Wigglesworth does an admirable job of bringing the story to life. He repeats the harsh truth: most mutual fund managers fail to beat their index.

In Hong Kong, we now have a new art museum, the M+. This new space with an impressive 50,000 pieces of art, opened to the public today. Art is in the eye of the beholder. For Spy this piece, named “Bloodlines”, part of the M+ Sigg Collection, reminded him more of Evergrande’s bondholders watching for their next coupon payment…than a generation of families.

Spy’s photographers spotted a new retail campaign in Singapore by UOB Asset Management. The company is firmly on the sustainability bandwagon.

Until next week…

Part of the Mark Allen Group.