Posted inNewsFSA Spy

The FSA Spy market buzz – 14 August 2020

Credit Suisse hires; T Rowe Price and ETFs; M&G’s profits; Blackrock surveys Singapore; Peak Zoom; Democracy in America; Advertising from CSOP and Fidelity, and much more.

During the past few years, it has become apparent that big companies are expected to play a larger and larger role in their communities. Shareholders, as Jamie Dimon the CEO of JP Morgan put it, are no longer the number one priority, but sit alongside staff, clients and community stakeholders. Spy tips his hat this week to Capital Group, which has just announced another $2m in disaster and humanitarian support for Covid-19. The asset manager donates more than $25m annually to around 3500 causes supported by its staff. With the world seeming to be in a greater mess than usual, it is a pleasure to be reminded that not every firm is a cynical, bottom-line obsessed machine.

Spy has spotted some musical chairs between the Swiss private bank giants. Credit Suisse has pinched a sales specialist from UBS. Dennis Yang, who focused on investment fund sales at UBS for nearly seven years, will now help expand Credit Suisse’s mandate sales. Yang will be based in Hong Kong but has got experience of living in Singapore, too. Both UBS and Credit Suisse have been working hard to build their mandates business in the last five years and Spy expects the direction of travel to be only one way.

This week, T Rowe Price finally joined the ETF party, notes Spy. The Baltimore-headquartered firm is not rushing out and competing with Vanguard or iShares in the passive, index-tracker space, but is using ETFs for the distribution of its active strategies. The first four funds to be launched are: Blue Chip Growth, Dividend Growth , Equity Income and Growth Stock. All of these are effectively replicas of long standing active strategies that have decent track records and are being managed by the traditional mutual fund equivalent teams. For example, the Blue Chip Growth fund is managed by Larry Puglia who has had a 26-year tenure at running the mutual fund. Expect more to come. T Rowe Price, currently with about $1.2trn under management, is planning to roll out more strategies from different asset classes.

M&G announced its half-year results this week. In line with many other managers, the firm announced that profits had fallen in the first six months of 2020. Pre-tax profits fell from £714m ($933m) to £309m. AUM also fell slightly from £352bn to £339bn. However, most of that drop came from the UK and Europe, home to the bulk of its clients. In Asia, the firm remained steady, with £8bn in assets. Spy did spot one interesting thing in the results for Asia: M&G has now taken compete control of the assets that were previously managed by Eastspring Investments. The firm “repatriated” £6bn of AUM from its former sister company and will now have direct control of those assets.

Blackrock has been trying to find out what Singaporean investors think of sustainable investments and has conducted a survey to that effect. The results were a tad surprising to Spy, who has always felt that return, above all else, is in the Singaporean psyche.  The survey reports that: “When it comes to their own money, 82% of Singaporean investors are willing to switch to sustainable options provided all things are kept equal, such as fees and return on investment. Half of them would even pay additional fees for sustainable investing options.” It is the half willing to pay more that caught Spy off guard. There does, however, seem a long way to go on education, with less than half the people surveyed not even familiar with the term “sustainable investing.” Of ESG, it appears “environment” is their top concern, with climate change, in particular, resonating.

Spy has said it before: China remains the best market in the world for active managers to ply their trade. According to Morningstar’s China Active / Passive Barometer, more than 85% of the active funds in China outperformed their passive equivalent over the last 12- and 36-months. It is not hard to see why. A very large market, with many under-researched companies, lends itself to strong fundamental research that gives professionals an edge. What a contrast to the US.

Have we reached peak Zoom? Spy, for one, certainly hopes so. Spy, like so many others, is rather sick of Zoom calls, and of having to rearrange his bookshelf to look impressive for his fellow Zoomsters. Jokes aside – take a look at the Zoom share price. The shares have finally dropped below their simple 50-day moving average. Chart fanatics will usually say this indicates an upcoming period of weakness. If you are lucky enough to have had some of their shares in your pocket, perhaps it is time to take a profit as you wander off to meet someone face to face…

Spy is fed up of US politics, with its zero-sum shouting at each other. Whether the Democrats or Republicans win in November, the USA seems stuck in a partisan quagmire.  With that in mind, a quote usually attributed to Alexander Tytler, a Scottish advocate, springs to mind. “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”  Whether Tytler said it, or the Frenchman, Alexis de Tocqueville, who sometimes gets the credit, the quote resonates now, more than ever.

Spy’s photographers have seen a few campaigns out and about. First up is CSOP. The Chinese manager is promoting its leveraged and inverse funds. Spy suspects that appetite for these is rather high among Chinese investors.

Fidelity, on the other hand, is promoting its perennial income range. Spy has also spotted this campaign running online.

Until next week…

Part of the Mark Allen Group.