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The FSA Spy market buzz – 23 March 2018

Lombard Odier AUM jumps; UBP is hiring; J Safra Sarasin loves ESG; Thailand and CGT; Pimco outflow; Talking mistakes; Wealth management poetry; advice from Voltaire and much more.
The FSA Spy market buzz - 06 April 2018

Spy was suffering an acute bout of cenosillicaphobia on Wednesday evening. For those unfamiliar with this particularly debilitating phobia, he will enlighten you. It is the fear of an empty glass and may be experienced on many different occasions especially when service is painfully slow in a bar or restaurant. Spy and his asset management companions had discovered one such bar in Hong Kong on Hollywood Road, which caused the dismay. Spy’s honest companions were lamenting a different disorder over several glasses of Danish Gyp Wit: The constant requirement to update clients and the market when sometimes there is absolutely nothing to say. One portfolio manager pointed out that on the 18th of April 1930, the venerable BBC Radio news announcer simply said, “There is no news” and played piano music for fifteen minutes instead. If only the market could accept a report which did the same on occasion. Indeed, thinks Spy

Lombard Odier has joined the party of Swiss banks that have reported positive earnings., notes Spy. On Wednesday the wealth and asset manager announced that in 2017 it had boosted assets by 17% reaching CHF 274bn from CHF 233bn a year earlier. The statement did not break down the assets by region, but Spy is aware that the bank has done regional deals with banks in Thailand and the Philippines in the last year or so, extending the Swiss group’s Asian reach with its innovative platform technology. Spy would be shocked if Asia was not a healthy contributor to that growth.

In a similar vein, UBP also grew its AUM 6% last year with net profit jumping 25%. UBP has now owned Coutts Asian wealth assets for two years and the hiring is ramping up to fuel further growth. The Swiss bank has hired about ten RMs, mainly in Hong Kong, since buying Coutts Asia and now plans to hire across the region at least another ten, but possibly as many as twenty, according to Michael Blake, UBP’s Asia CEO. What sort of candidates does UBP want? Experienced ones with at least ten to fifteen years on the front line. And speaking of Asia, Guy de Piccotto, CEO of UBP, said in a recent interview “an acquisition in Asia, where we really want to increase assets under management, would be of particular interest”. No slowing down there, thinks Spy.

Meanwhile, back in February, overlooked by Spy at the time, Bank J Safra Sarasin also reported a jump in assets under management to CHF 170bn from CHF 148bn, up a healthy 14%. Asia now counts for nearly CHF 20bn of the total group AUM. What did catch Spy’s eye was the bank’s enthusiasm for ESG principals outlined in its annual report: “In addition, Bank J. Safra Sarasin offers a detailed ESG Analysis for a client’s entire portfolio. The analysis provides more concrete ESG insights to clients and [the] holdings profile of their investments from a sustainability point of view.” This trend is coming in a much bigger fashion. Spy has seen asset managers get behind ESG of late but never this level of commitment at a wealth management level. Impressive.

Is a change coming to Thailand’s fixed income regime? One of Spy’s contacts, this week, told him that the government in Thailand is considering adding capital gains tax to fixed income funds. Hitherto, individual bonds have attracted CGT but not bonds within funds or the fund itself. The idea is, apparently, to level the playing field as funds have had an “advantage”. Spy is more cynical and suspects the ministry of finance has spotted a nice little revenue generator. Of course, one would only pay the tax if your fund has actually made a gain.

Listen carefully and you can probably hear the sound of hands rubbing together. Pimco’s GIS Income fund suffered its first outflows last month after an impressive 29 consecutive months of inflows, according to preliminary data by Morningstar. Why all the hand rubbing? Other fixed income managers on the street, who have been bystanders as the Pimco juggernaut has gathered assets, are probably thinking a rotation to their product is on the way. Well, perhaps. There is another possibility though, ponders Spy: investors may be spooked by rising rates and looking for a different asset class altogether.

Spy has spoken to dozens of fund selectors in the last month. Among many other titbits and views they shared on asset managers, one bugbear came through regularly. The selectors complained they were almost always given presentations which told them exclusively about successful stocks or bonds acquired by the fund and almost never told them about their failures. Many lamented the fact that so few portfolio managers were prepared to talk about poor choices, too. “We know things go wrong in a fund from time to time – it helps to understand the PM so much more when they give us both sides”, lamented one selector to Spy.

Singapore based robo-adviser, Stashaway announced this week it had raised more cash to fund its growth. In a third round of funding, the enthusiastic start-up announced that a group of family offices has given the business $5.3m in new Series A money. Robo-advisers take a long time to become profitable, if at all, in Spy’s experience. If Stashaway is to be successful, Spy suspects this won’t be the last round.

“Get an index tracker”, scream the ETF kings. Yes, yes, agrees Spy but which index do you choose? Last night the FTSE 100 touched 7000 – that is only 1% above same level it was at the end of 1999. Therefore, nearly the entire return of the FTSE this millennium has come from dividends alone. Not exactly the poster child of passive returns, is it?

It is all too easy to bash Donald Trump, thinks Spy. His personal style is so abrasive to many. Politicians and civil servants of all stripes must wonder when they will be the target of his Twitter rants. One area that the Donald has stopped tweeting about is the stock market. When markets were racing ahead last year, the Donald was claiming credit via Twitter with alacrity. Since February, not so much.

Spy dishes out unwanted advice freely. Most of it probably worth the price you, dear reader, have paid for it. However, this week Spy implores all wealth managers to avoid writing poetry for public consumption, unless you are actually a poet. What prompts this bit of sage advice? Spy came across a wealth manager in the UK named Stuart Alexander, who decided, only God knows why, to write a poem about mutual funds for world poetry day. The specimen is provided here for posterity and should serve as warning to all.

There is seldom an occasion when French wit and philosopher, Voltaire, has not appropriate comment. He provides’ Spy’s quote of the week. “To learn who rules over you simply find out who you are not allowed to criticise.”

Until next week…






Part of the Mark Allen Group.