Is the trickle becoming a flood? Spy has been pleasantly surprised to see some familiar faces around Hong Kong after a long absence. Spy suspects that Hong Kongers and expats who deserted the city during the worst of the Covid restrictions are finding their way back again. Reports are surfacing of bankers bored in Singapore longing for Hong Kong’s edginess. London’s creaking rail system and high taxes do not a paradise make, either. Is there light at the end of Hong Kong’s long tunnel? Spy certainly hopes so. He will do more than drink a toast to that.
A lot of hot air, or the best thing since the hot air balloon, wonders Spy? Invesco has just launched two new ETFs, which are all about clean energy. The Invesco Wind Energy UCITS ETF and Hydrogen Invesco Hydrogen Economy UCITS ETF have just debuted on exchanges across Europe, including London, and allow investors to target very specific areas of this cleaner energy complex. Both funds are based on indices developed by WilderHill and are passive. In the hydrogen area, so called green hydrogen is the holy grail because it uses no fossil fuel to produce and has no nasty side effects, either. Both have fees of 0.6% and come in a variety of currencies, including USD.
Have you heard of Essentia Analytica? You might not have, but perhaps you soon will – and not just from Spy. The firm, founded by a former portfolio manager, Clare Flynn Levy, is a consultancy that is focused on behavioural investing. Its main area of concern: alpha. Specifically, was the outperformance for a fund manager, over a particular period, down to dumb luck or was there some real skill involved? This is possibly the single most important question in manager or fund selection. Essentia believes it has found a way to measure this using a unique analysis set. If you want to be convinced, the firm has a new white paper out that it reckons shows its methodology works. Download it here.
Bearing in mind the above, Spy was intrigued to read that according to an SPDJI report, of the 29% of US 791 large-cap equity funds that beat the S&P 500 in 2019, 75% beat the benchmark again in 2020. But only 9.1%, or 21 funds, were able to extend that streak of outperformance into 2021. Beating the index once is hard, twice harder and the third time, almost impossible, it seems.
What is the definition of optimism? A 25-year-old base jumper planning his 50th birthday party? Well, perhaps. For Spy it is the rumours that Mayoshi Son, Japan’s maverick investor and CEO of Softbank, is going to launch yet another Vision Fund. Vision Fund III, of course. Vision I and Vision II have performed rather poorly after backing companies such as WeWork (we don’t) among many others that have turned sour. Losses on investments have swollen to a whopping $50bn. Just a few weeks ago, Bloomberg was reporting that Softbank was mulling massive jobs cuts. Can both of these stories be true?
Is First Sentier wanting to join the “let’s buy a company or two crowd”? Financial News London has reported this week that the Australian-headquartered company, that is now owned by Mitsubishi UFJ Trust and Banking Corporation, is on the lookout to buy asset managers in Europe and the UK to expand its footprint. Spy hopes the bean counters take a careful look at Jupiter, Janus Henderson and abrdn’s merger histories before making any excitable decisions. In Spy’s humble experience, small acquisitions work best. Niche managers added to larger machines, may work very well. Mega-mergers remain the graveyards of CEOs’ egos.
Apparently, Singapore wants to add another 20,000 finance jobs over the next 4-to-5 years, according to MAS. With 200,000 people already involved in financial services, that would add another 10%. Singapore’s finance industry is now proportionately larger than the UK’s, by Spy’s calculations. In the UK, 1.1 million are reported to work in the finance sector out of a population of 67 million, therefore 1.64% of the total. In Singapore, with a population of just 5.6 million, with 200,000 in the industry, that is nearly 3.6%. Spy can look forward to even more gaudy adverts by AIA and Prudential with their grinning top insurance floggers…
Hope is not a strategy, apparently. Cineworld, a large cinema chain, declared bankruptcy a few weeks ago and in its filing, said that, sadly it “failed to become a meme stock”. If that was your plan all along, you probably deserve to go bust. Spy felt something similar about crypto, Ethereum this week. Apparently, an upgrade to the core system, allowing for more energy efficiency, was meant to make investors rush out and buy more tokens according to the believers. After the upgrade the crypto fell along with Bitcoin. Ether is down 16% in the last five days, alone.
What have the people of China done to deserve this? Starbucks has announced that in order to revive its fortunes, it is going to open another 3,000 coffee shops in China, bringing its total there to 9,000! Spy has always detested wishy washy lager beer and prefers his strong and tasty craft brews. So, too, with coffee. Real espresso or tea, thanks. Starbucks’ share price has slumped 20% over the last year. Spy suspects real consumers are baulking at paying five bucks for some warm milk that has merely glanced at coffee beans in a brochure.
Until next week…
P.S. Spy can’t help but feel the ending of eras is upon us. The Jumbo Floating Restaurant has gone from Hong Kong Harbour, The Queen has died and now Roger Federer has hung up his racquet. Brave new world, indeed.
