“What a difference a day makes, twenty-four little hours”, sang Dinah Washington in 1959. Well, perhaps not a day, but a few weeks anyway. Sell off, what sell off? Markets have been rallying as if there is not a care in the world. Since Spy’s last column the Easter bunny has been delivering chocolate to children around the world. The Federal reserve went one better and simply handed out trucks full of dollars to its favourites. Spy spoke to two PMs this week who were brutally honest. They both did not buy this dramatic rally in their hearts, especially with catastrophic job numbers emerging everywhere and economic data that is more shocking than a Park Chan-wook movie. However, they both said the same thing: “If we don’t buy, we will look like fools when clients call.” Both were terrified of the dreaded passive ETF comparison. Ah, there’s the rub.
News reaches Spy that Canaccord Genuity Wealth Management International (CGWM), the global asset and wealth management arm of one of Canada’s largest financial firms, has a new CEO. Andy Finch has been promoted to CEO after a long career within that business. Andy should be well known to many wealth advisers in Asia as he was, for a long time, the international sales director for the firm. The manager is best known for its range of multi-asset funds and its discretionary outsourced proposition. CGWM has an office in Singapore, which is headed up by Nick Teo, through which it serves the Asia region. The business currently has nearly £30bn ($37bn) in assets under management in its international arm, according to its website.
It is reporting season and firms are having to reveal the effects of COVID on their businesses. Relatively few are unscathed, notes Spy. Jupiter Asset Management put out a trading update to the end of March 2020, this week, and the scale of the carnage was evident to see. Net outflows were £2.3bn with a decrease in AUM of £7.8bn in total, leaving the firm with £35bn under management. £5.5bn of that decrease, was simply market fluctuations. Jupiter is currently acquiring Merian Global Investors and Merian, proportionally, has suffered even worse. Merian’s outflows were £2.6bn and a negative £4.1bn in market related reductions, leaving the firm with just under £16bn in AUM. Jupiter reiterated that it planned to go ahead with the acquisition of Merian, as it noted, “Despite the market volatility which both firms have experienced, the strategic and financial rationale of the acquisition remains compelling.” Ashmore, the FTSE-250 listed emerging markets specialist, also announced net outflows of $3.6bn and $18bn in market related losses, bringing its AUM down to $77bn. The markets have bounced strongly since the end of March and Spy would not be surprised to see those market losses having been substantially trimmed since then.
No doubt there are many others lurking and, as yet, unheralded, but Spy has come across the first fund to close since the sell off. Algebris has liquidated its Quant Arbitrage Fund as performance suffered in the great COVID sell off. The fund was only launched in May 2019 and was designed to take advantage of spikes in volatility. Clearly, however, not quite the level of volatility the market has thrown about assumes Spy. It is not all bad news for the London-headquartered firm: the manager launched a third Italian non-performing loan fund in February, to take advantage of distress in that market with an initial raise of $125m, ultimately targeting $1bn in capacity. No doubt there are now investment opportunities galore for that strategy. Algebris manages about $12bn in both credit and equity strategies and has offices in Singapore and Japan.
Spy was reminded this week of that classic scene in 80s movie, When Harry Met Sally. It is the restaurant scene when Sally, in a less than discreet manner, is faking an orgasm and the elderly lady sitting nearby says to the waitress, “I’ll have what she is having.” Why are you thinking of dated rom-coms, Spy, you ask? It was the note by Rick Rieder, director of Blackrock’s global allocation unit: “We will follow the Fed and other [developed market] central banks by purchasing what they’re purchasing, and assets that rhyme with those.” With markets practically having an orgasm over central bank printing and buying, it does not surprise that Blackrock (and others) want what they are having. Spy wonders, however, if the experience will be as fake as Sally’s.
Funnily enough, Spy spotted this little market push from Blackrock. When you have been given the role of buying credit for the Fed, you may well be doing your clients a favour by reminding them that prices in credit may just be moving up….
Spy spoke to one asset management CEO this week in Singapore. Spy asked what clients are looking for in the volatile times. He responded, “Pretty much the only thing we hear from clients is that we should be diversified and managers had better find companies with strong balance sheets.” Spy has to ask, when don’t clients want diversification and companies with strong balance sheets?
There is much speculation this morning that Gilead Science’s drug, Remdesivir, may help Coronoavirus patients. The firm has not exactly shouted about the success of its drug, but that has not stopped others shouting from the rooftop on its behalf. Knowing how cautious the FDA is, Spy is not holding his breath that this is the breakthrough drug the world is waiting for, or that it will be approved for use any time soon. Still, anything to keep that rally going…
Spy was sent this little titbit from a reader this week. It is the return figures of the Nasdaq 100 since 2009. Spy looks at this astonishing table and asks, how does the average active fund compete with this kind of performance? If you were a wealth manager it would be fairly easy to simply say, “Buy the Nasdaq 100 ETF every month and go to the beach. See you in a decade.”
Until next week…