Posted inFSA Spy

The FSA Spy market buzz – 13 January 2023

Brown Advisory hires, Pinebridge promotes, Value Partners and Chartwell on Hong Kong’s opening up, the stealth rebound, BlackRock’s job cuts, female CEOs, pay cuts, Fundsmith’s candour and much more.
FSA Spy

In the last few weeks, for anyone paying careful attention, markets have been rising rather rapidly, notes Spy. Emerging markets have rebounded more than 20% from their lows. Bitcoin, despite the high publicity of turmoil in crypto exchanges globally, has rallied from below 15,700 to just shy of 19,000. Gold is above $1900. Bond markets have rallied, too. The optimists seem to have the upper hand, for now. The tiniest hint that interest rates are going to slow down has wealth and asset managers rushing out to buy all and sundry. Spy has even seen the words “Meme Stocks” being bandied around online. Speaking to an Aussie equity manager in Singapore this week, he told Spy, “There were a lot of assets that looked quite cheap by the end of last year. We have been snapping up some downtrodden stocks.” What a difference a few good days make. After such a dreadful 2022, Spy is not entirely surprised there is some bouncing from the bottom, the real question is: can it last?

News reaches Spy that Serena Sim has stepped down from her role as Head of Intermediary Sales at Janus Henderson in Singapore after four years. Spy understands that Serena has moved to Brown Advisory and will remain in Singapore serving the wholesale market. Spy has no news on who has replaced Serena at Janus Henderson. Brown Advisory has had success with its Beutel Goodman US Value Fund in the last 12 months; it is up about 17%.

Hat-tip to Lisa Wang, who has been promoted at Pinebridge to Chief Marketing Officer. Lisa was previously Head of Marketing and Communications in Asia Pacific based in Hong Kong. Lisa has relocated to Singapore and is now in charge globally.

With Hong Kong finally opening up, Spy has sensed a palpable sigh of relief among Hong Kongers. Asset managers have been commenting too. David Townsend, Managing Director of EMEA Business at Value Partners Group, commented: “We are very encouraged to see the re-opening of China and Hong Kong’s shared border after such a long time. Currently, there is a quota of 60k people per day, which is actually quite tight relative to the pre-Covid levels…Given the high demand, we believe that the quota will be increased quite quickly.” Spy hopes he is right.

For Ronald Chan, Founder and Chief Investment Officer at Chartwell Capital: “The border reopening announcement between Hong Kong and Mainland China was made late last month, and since then many stocks have rebounded nicely. For example, some property companies that have a large proportion of their portfolio in shopping malls and rental assets, surged by 10-15 percent.” Like a coiled spring, reckons Spy.

Whilst optimism around the world may be increasing, not all is sunshine and light. BlackRock announced 500 job cuts this week. Is this a situation of cutting when markets have hit the bottom and the firm will be rapidly hiring back as market rise? A case of sell low and then be forced to buy high? Spy will watch with interest.

Do women, on average, run companies better than men? This is a subject that no sane male commentator would publicly delve into and Spy has no intention of doing so now. However, for investors who believe it to be the case, there is now an ETF to express that view. The Hypatia Women CEO ETF, listed in New York, exclusively invests in firms led or chaired by women. The logic behind the active strategy is that as women, unjustly, face more barriers to get to the top, those that do so must be exceptionally talented and, therefore, will run exceptional businesses. Some firms included in the strategy are: Occidental Petroleum, SE International and Axcelis Technologies.

One’s heart just breaks a little. Some people are having their salaries cut brutally. Take Tim Cook, the CEO of that small computer company Apple. The poor chap has had his pay slashed by 40%! Yes, Tim is going to have to make do with only $49m this year. Since Cook took over as CEO in 2011, Apple stock has returned 1,212% versus 290% for the S&P 500. Cook’s previous stock grant from 2011 ended up being worth more than $900m at Apple’s September 2020 share price. Spy is not too sure how he is going to get by.

Renowned British fund manager Terry Smith, of eponymous Fundsmith, was rather candid this week admitting last year was tough for his fund as it fell 14%. He said it was “inevitable” that he would eventually have a bad year after so many good ones. Terry blamed central banks as the cause for his underperformance for raising rates so rapidly. Try as he might, Spy can’t recall Terry crediting central banks for cutting interest rates to record lows for his stellar outperformance in previous years.

Have you ever heard private bankers or fund salespeople saying “we like to get an annual return of 5 to 10%?” Well, here is the kicker. That average return simply does not exist. Nice little chart below from Jeroen Blokland shows how wide the dispersion of returns really is. And, 5% is almost never the actual return.

Until next week…

P.S. Happy Friday the 13th. If you have ever wondered why Fridays that fall on the thirteenth are considered bad luck, one theory relates to Norse mythology. A Norse myth tells of a dinner party for 12 gods at which a 13th guest showed up uninvited. The gatecrasher was the trickster god Loki who promptly shot the god of joy and happiness, Balder. Many other theories abound.

Part of the Bonhill Group.