Spy caught up with an old friend who manages a concentrated emerging market strategy this week who was, thankfully, not taking part in any of this dry January nonsense. Glasses of big, bold Italian reds were on the menu at a wine bar in Mid-Levels. His taste in wine is “old world”, even if his investing preference is distinctly new. He was in a remarkably bullish mood. “Valuations have seldom been more attractive and currency weakness should turn to currency strength, especially if a Trump victory in the US presidential election becomes more likely”, he mused to Spy, “Here in Asia, the most remarkable transformation is taking place in so many industries: finance, tech, healthcare, travel – to name but a few — and opportunities abound for a serious re-rating.” Optimism is infectious and Spy felt like reaching for his broker, and would have done so, if the waiter had not arrived offering us yet another glass.
Spy salutes Aviva Investors which has put out a remarkable piece it has called the “Aviva Investors Little Book of Data”. It is filled with interesting and sometimes quirky facts on the state of the world. For data enthusiasts, it is a treasure trove. What Spy really took away from it was the sheer demographic advantage that India now has over China with its rapidly growing, youthful population. While China is losing people – in fact two million in the past year, India is adding people daily. It makes for a very powerful future consumer base.
A remarkable thing happened during 2023, notes Spy. Finally, global ETF assets have exceeded those held in old style mutual fund structures. As recently as 2005, ETFs held about 15% market share. That has steadily and surely grown during the past 18 years and has now cross the 50% barrier. If “the trend is your friend”, expect to see further growth in market share for years to come. Spy tips his hat to the ETF industry that has introduced active strategies within the ETF format to complement passive index followers. Further, the transparency of the underlying holdings, in many strategies, has been revealed and that has not, ultimately, prejudiced the funds in question. For years, mangers were reluctant to reveal anything more than their top ten holdings. Not any more.
Does history repeat or does it rhyme? For once, Spy hopes that is neither. Over the last eighteen months, with aggressive rates hikes, central banks have manged to bring down inflation across the world. Well, what if the initial success is merely stalling what is to come ahead? Spy came across this eye watering graph of the way inflation surged in waves in the 1970s. Let’s hope for all of our sakes that the world does not repeat or even rhyme with that wealth-sapping, devastating era.
One of Spy’s photographers was out and about in Davos this week. He snapped this picture of the ‘pension’ that mighty BlackRock had taken over for the duration of the World Economic Forum (WEF)in the snowy Swiss alpine resort. With asset managers finding themselves increasingly caught in up the fraught American culture war debates about investments in fossil fuel-derived energy, geopolitics and other ESG factors (a term BlackRock is no longer using, by the way) Spy is almost surprised the firm is happy to be so prominent at forum that has, itself, become the source of a culture war in Europe. The huge farmer protests in Germany this week had attendees chanting anti-WEF slogans. It is the age-old debate: put your head down and don’t get noticed or head above the parapet to try and influence global policy and suffer pot shots.
Spy’s quote of the week is about branding. “A brand is nothing more than your company’s collective reputation. It takes decades to build and moments to destroy.” Various forms of this idea have kicked around for years but it is absolutely true, nonetheless.
Until next week…
