Spy raised a glass of red to new US President, Joe Biden. Spy does not envy his inbox which is overbrimming with problems, challenges and debts galore. We may not be in for the same Twitter craziness that marked the Trump era, but we can all look forward to a gaffe or two over the next four years if Biden’s record holds. One Delaware senator said of the new President, “Biden is not a gaffe machine. He is the Lamborghini of Gaffes.” Biden after all, once had this to say about the economy: “The most important issue facing the middle class was a three-letter word: J-O-B-S.” Let’s hope his policies are better than his counting.
JP Morgan Asset Management is giving university students in Asia a taste of being a financial analyst, notes Spy. The giant is running what it calls the 2021 Asset Wealth Management Challenge for students in Singapore, Hong Kong, Shanghai/Beijing and Taipei. The competition will allow teams of four students apiece, through presentations and submissions, to “have exposure working with clients from global financial intermediaries, sovereign wealth funds, central banks and to some of the world’s wealthiest individuals and families”. Students have until 28 February to register with JPMAM to take part in the fun. There are some prizes, but, no doubt, the biggest prize of all, may be the chance to work for the firm itself after graduation, thinks Spy.
In an era of tedious fence-sitting, hedging and “on the other hand”, Spy was delighted to find an unequivocal view from a major wealth manager. BNP Wealth Management Asia is positively bullish for the year. In an outlook piece published this week by Arnaud Tellier, CEO for APAC at BNP WM, he struck a particularly upbeat tone driven by ESG, central banks and of course, the vaccine.
He writes, “In 2021 we see global growth expanding to +5.2%, accompanied by a slight rise in inflation driven by the weakening dollar (we expect the US currency to trade at 1.25 against the euro by the end of the year). Bond yields will rise slowly, accompanied by rising equity markets, with cyclical sectors the first to rise in the early recovery phase. Overall, it looks like a favourable environment for investors to continue taking on risk.” Time will tell, indeed.
Turn on the television, sitting outside the region, and one may be a tad gloomy about Hong Kong at the moment, ponders Spy. A hedge fund was reported to have left the city, office vacancies are rather high, political discourse is fractured and students are restless. It was with a certain amount of encouragement, then, that Spy analysed some data from eFinancialCareers.com. It currently lists 1814 asset management jobs around the world on its site. Singapore currently has a healthy 157 of those vacancies. Hong Kong, however, has an even larger 232 jobs available in the asset management industry. That means nearly 13% of all available asset management jobs, listed globally, are offered in the Fragrant Harbour. Not exactly doom and gloom, is it?
How do you compete with blind, passive, unemotional, index matching ETFs? Spy saw some data this week on the top 60 largest ETFs in the US. Only one of those is an active fund. It won’t come as any surprise to many that the strategy is the ARK Innovation Fund which has ridden the Tesla boom. It comes at number 51 on the list 23.5bn in AUM and a brilliant 176% return over the last 12 months. What is the answer, apart from luck? Concentration. Large positions in a small number of companies. After all, if any investor can now buy market beta with a tracker at practically zero cost, what on earth is the point of trying to ‘just beat the market’? One probably needs to try and smash the market to bits to stand out.
The Bitcoin bulls, who must be feeling a tad singed this week, are no doubt very excited to hear that BlackRock has lodged documents with the US regulator this week to allow two of its funds, BlackRock Global Allocation Fund and BlackRock Strategic Income Opportunities Portfolio to include some Bitcoin in their portfolios. Not so fast, thinks Spy. The application is actually for ‘cash-settled Bitcoin futures’ and if there is one thing Spy knows about the futures market, it is as much about the short side as it is the long side. Bitcoin may just have another potential shorter, with serious firepower, entering the marketplace.
Is the era of DIY stock investing beginning to set in China? According to consultancy, Z-Ben Advisors, Chinese retail investors are pouring money into professionally managed funds at an extraordinary volume. A total of RMB 1.57trn ($243bn) was put into new equity funds in 2020. Apparently, the reason given is that so many professional funds in China did well last year, with performances that can’t be ignored. Spy is unsurprised the flood of foreign managers applying for local licenses in China shows no sign of abating.
Spy was amused to see a local Hong Kong boutique asset manager boast on LinkedIn that it had had “an astonishing year where our clients achieved well over $100m”. This breathless, slightly odd way of describing the performance, announcement was then immediately caveated with the line, in brackets: “(in realised and unrealised gains)”. Spy guesses it is always hard to hold on to any gains but the “unrealised” bit made the achievement seem awfully ephemeral and Spy wondered whether the $100m gain is just as likely to evaporate like dew in the morning sun?
If you are looking for some proof that tech is frothier than a well-made Pina Colada, Goldman Sachs has some fun data to contemplate. The firm has built something it calls the GS Non-Profitable Tech Index, that tracks, unsurprisingly, unprofitable US-listed tech firms. The chart tells a thousand words. Spy knows that Amazon and Tesla were both once unprofitable, but then again so were Pets.com, MotherNature.com, Exactis.com. Perhaps investors should dust off the classic book on the dot.com boom, Dot.Con by John Cassidy.
Spy rather enjoyed this cynical observation by Peter Schiff, founder of Euro Pacific Funds this week, “There’s lots of talk about a stock market bubble, but those who see it are advising investors not to sell as the bubble will get much bigger before it pops. That’s the hubris that defines every bubble. Everyone thinks they’ll know when to get out. In practice that’s impossible.” Ah, there’s the rub!
Until next week…