The American satirist, PJ O’Rourke, once published a book titled, “Give War a Chance”. He was not being serious, of course. This week, Spy over one too many glasses of Bordeaux with an asset management sales friend, lamented that war in the Middle East is once again dominating headlines and adding to the unsettled feeling in markets. And yet, despite the nasty news, the highly experienced salesman accurately reminded Spy, “That regional wars seldom have a long-term impact on market performance. Interest rates and other economic policies have a far bigger role to play. Wars are a distraction.” Whilst that may be true, Spy would far prefer to give peace a chance.
The active ETF juggernaut rolls on, notes Spy. This week Eaton Vance and Parametric have brought five active ETFs to market in New York. Both firms are now part of the Morgan Stanley Investment Management family. While the strategies listed are similar to some existing strategies managed by the firm, they are not actually replicas. The strategies are Parametric Equity Income ETF (PAPI), Parametric Hedged Equity ETF (PHEQ), Eaton Vance High Yield ETF (EVHY), Eaton Vance Intermediate Municipal Income ETF (EVIM) and the Eaton Vance Ultra-Short Income ETF (EVSB). In the first nine months of 2023, actively managed ETFs gathered nearly a quarter of the US industry’s net inflows. These flows occurred despite these ETFs representing only about 5% of the assets.
It is reporting season and it seems that Man Group is having a rather stellar time. The company announced this week that assets had reached $161bn for the first time. Interestingly to Spy, it is the absolute return and long-only active side of the business that is gathering assets. For a long time, describing Man as the “world’s largest listed hedge fund manager” told the whole story. Not any longer; less than half the firm’s asset are in hedge funds or alternative funds as their investments have pivoted to more traditional management.
Schroders also reported results yesterday and were largely flat across the group, although their wealth management business was the better performer. The business now has £724bn ($885bn) as of September 30. Schroder is $115bn away from joining the $trn club. Champagne still on ice.
Nice little fact on Asia’s importance in capital markets from Eastspring. “In 2010, total capitalisation across key Asian markets was nearly $15trn.” Well Asia has not been standing still. This “doubled to $30trn by 2022…More importantly, proceeds from Asia Pacific’s IPOs also exceeded the Americas in 2022, the first time since 2018, with 802 IPOs raising $108bn.” Not bad a all.
Spy continues to read about “deglobalisation” in financial and economic reports. One may have the impression that means supply chains are being brought home. In fact, Schroders was at it again with this week with a piece out titled, “Deglobalisation, decarbonisation and demographics: how they’re going to reshape the investment landscape.” And yet, here is the funny thing, the article talks more about moving manufacturing away from China to other jurisdictions and very little about actually bringing them home. Now Spy may be an old-fashioned kind of fellow, but that really seems a lot more like diversifying across the globe than real “deglobalisation”. Spy thinks the death of globalisation, to paraphrase Mark Twain, has been greatly exaggerated. Spy also presents, Exhibit A, courtesy of Flight Radar. A snapshot of flights taking place across the world at a particular moment yesterday. It does not look like everyone is staying home, to Spy.
We may be heading towards Halloween, but Spy is pretty sure the really scary stuff is happening in the mortgage market (in the US anyway). Yesterday, the benchmark 30-year mortgage rate went through 8%. If you were used to paying 1.5 or 2% for your mortgage, moving home now must seem all but impossible to any but the most cash rich of buyers. And that is not ideal for the economy. Unsurprisingly, the Conference Board, is feeling fairly gloomy. Its Leading Economic Index declined for the 18th month in a row, the longest down streak since 2007-08. The Conference Board is now forecasting a “shallow recession in the 1st half of 2024”. Of course, that has in fact been pushed back again from prior calls for a recession to start in Q4, Q3, Q2, and Q1 of this year. Even stopped clocks are right twice a day…
HSBC has snapped up Citibank’s retail wealth management portfolio in mainland China. The portfolio comprises about $3.6bn in assets and deposits from wealth customers across 11 major cities, HSBC announced. The British-Hong Kong bank seems to have no intention to follow in the footsteps of so many other Western firms that are pulling back from China slightly due to geopolitical worries.
Spy’s photographers have seen some new outdoor advertising in Singapore by M&G Investments. The firm has recently been granted a retail license in the Lion City, so Spy is hardly surprised the firm is blowing its trumpet.
Until next week…
