“The law of unintended consequences, like Murphy’s law and Daniel Kahneman’s Reversion to the Mean are some of the most powerful forces in the universe” said an economist at a wealth manager in Hong Kong to Spy this week over Dim Sum in Kowloon. “Trump is busy threatening Europe with tariffs, trying to do a deal with Putin on Ukraine behind Europe’s back, lecturing Europe on its social policies and what happens? Their stock markets outperform the S&P 500 in the year to date. While the elite may bridle, nimble investors are pouring in and swapping overpriced, over-concentrated US stocks for down beaten and unloved European ones.” Indeed. Spy is pretty sure this is not what Big Donald had in mind.
Another week, another ETF that wants to capitalise on excluding China from the supply chain. This time it is the turn of GMO to use that particular hook to position its new emerging markets ETF. “The GMO Beyond China ETF will primarily invest in emerging market equities with the exception of Chinese securities. GMO uses a combination of proprietary quantitative and fundamental investment methods to identify emerging market equities that are well-positioned to benefit from the expected trend of nearshoring.” Spy happily points out that Chinese exports reached $3.577trn in 2024, according to Statista, an all-time high. At the beginning of Trump’s first term, in 2017, it was $2.26 trillion. Betting against Chinese exports seems a fool’s errand, even with a wrecker in the House.
What is currently the dirtiest word in current corporate-speak? “Diversity”, it would seem to Spy. Global diversity funds saw net outflows of $376m in 2024, according to Morningstar. Although this figure is lower than the $1.2bn withdrawn by investors in 2023, it marks the second consecutive year of outflows from diversity-focused funds worldwide. Spy was always sceptical about this sort of thematic, which relies on vague interpretations of a company’s hiring activities. As companies scramble to scrub DEI targets from their agendas, this trend will surely accelerate.
Spy saw a headline this week, “Mercer acquires $35bn investment boutique Secor Asset Management”. That Mercer bought a firm that, is “a global provider of bespoke strategic and portfolio solutions with offices in New York and London” is not much of a surprise. What did get Spy thinking was the term “boutique”. $35bn is not a small amount of money but in the world of asset management it is, these days, considered tiny.
Hat tip to Pictet Asset Management for a very thoughtful piece out this week about the difference between firms managed by families and those run by corporate warriors. It is worth reading in full, but this caught Spy’s eye, “Owner managers prioritise projects and investments that create long-term value for the company and typically do so while maintaining strong balance sheets. The financial health and sustainability of the company comes before short-term profits. Research has shown that this differentiated approach can create sustainable competitive advantages for family run and founder led businesses. And this ultimately translates into better returns for investors. For example, one study has shown that listed companies controlled by their founders performed almost twice as well as the annualised performance of the broader market.” The key point is that people investing their own money, often make better long-term capital allocation decisions, than those with an eye on their next job move who play monopoly with the company piggy bank.
The rise of software to its position of global prominence in the economy is an undeniable “megatrend” of the last 75 years. Sands Capital has been looking at the future of the industry and seems rather bullish, despite idiosyncratic weak performance among some software firms of late. Spy loved this nugget: “JPMorgan Chase, for instance, invests $14bn annually to accelerate digital transformation and enhance customer experiences—noting at its annual investor day that this is a top business priority. While the company is a bank at its core, the primary way consumers interact with it in 2024 is via its mobile app.”
When Spy talks to most wealth managers and mentions venture capital, they almost always think tech, possibly green-tech. Spy was therefore rather staggered to read that, according to Bain Capital and Pitchbook, defence has been one of the biggest VC winners in the last decade. VC investment in defence companies and startups has increased more than eighteen times over the past decade, from just $500m in 2014 to an estimated, decent, $8.7bn in 2024. With pressure on Europe to arm up and meet increased minimum NATO commitments, we can surely expect that number to balloon even further.
Bitcoin has quietly scored yet another institutional backer. Mubadala Investment Co., a sovereign wealth fund based in Abu Dhabi, invested $437m in bitcoin at the end of last year. In a 13F filing submitted to the SEC on February 14, the fund disclosed a $437m investment in the iShares Bitcoin Trust ETF. Since Mubadala manages $302bn in assets it is very small beer, but enough not to be ignored, either.
Is nothing sacred? Apparently, Amazon has taken full control of the James Bond franchise through its MGM Studios business. From one Spy to another, this seems a poor turn of events and this Spy will not be reaching for a martini, shaken or stirred. Then again, Roger Moore, former Bond actor, put it best, “James Bond is not meant to be taken seriously at all. He is a spy, but every maître d’ and hotel general manager knows his name from Hong Kong to the Bahamas.”
Spy’s trusty photographs have spotted a new outdoor campaign in Singapore for UOB Asset Management which is currently promoting its private bank CIO funds range which offers growth or income strategies.
Until next week…
