Spy had a coffee this week with a head of sales at a large American asset manager. He told Spy, in no uncertain terms, “to expect more and more funds, or strategies, to be launched with determined outcomes.” In an uncertain world, the hope for certainty, even if it is just that, is in real demand. The highly experienced distributor also told Spy his salespeople are finding it much harder to drum up new business from new clients in the Zoom age. For all the work from home enthusiasm, Spy does not know a single salesperson who would not like face-to-face meetings to go back to normal.
BlackRock recently won the right to have a wholly owned, local fund management license in China. As a result, the firm is now closing a few of its private funds in China in order to comply with local regulations, as it shifts to a more traditional mutual fund model in the country. Spy sees this as part of a much larger trend that is accelerating: the normalisation of activity within China for foreign managers. The highly creative, or limited ways, foreign firms could access the Chinese market are giving way to normal, competitive, open playing field standards. That can only be a good thing.
Spy spotted a new ETF launch this week by Janus Henderson that raised an eyebrow. The Anglo-Australian-American firm has just launched an actively managed, collateralised loan obligation fund, with the ticker JAAA. Spy remains convinced that every single strategy that is available in traditional mutual fund form, will soon find its way into an ETF / ETP version. It is fair to say that CLOs, although a large market (about $700bn in the available universe) are hardly mainstream. Most retail investors wouldn’t have a clue what this asset class does within fixed income. The fund is highly competitive with a mere 0.25% annual fee. Sign of the times.
In 1994 Joe Cocker sang, “Have a little faith in me” and soared towards the top of the charts. It seems to Spy many investors have been taking more than a little faith in their S&P 500 investments. Bloomberg had a fascinating chart out this week showing just how much value investors place in leading companies’ intangible assets. A mere 18% of the value of the S&P 500 is in their real assets: buildings, cars, factories, stock etc. The rest is brand, IP and, well, faith in earnings, Spy supposes. Thus, more than 80% is built on faith, and hot air.
A lot of that hot air has been the stellar performance of growth stocks. One asset manager that is suggesting investors look to value now is Amundi, It has been a lonely place to be in value for the last decade but the French giant thinks change is in the air. In a research note out this week, Marco Pirondini, head of US equities wrote, “we believe the most appealing opportunities in US equities are in stable growth and quality value stocks. Stable growth stocks can provide exposure to secular growth trends that are not dependent on economic growth.” The firm points out that “the outperformance of growth stocks over value stocks has reached record levels, as has the valuation gap.”
Is life returning to normal? In one sector, something close to many Hong Kongers’ hearts, it does seem to be. Spy is, of course, talking about gambling in Macau. The old golf-baccarat- dinner-back-home-on-the-ferry extravaganzas seem to be back on. “October was the first time since January that we’ve seen significant real business volumes and patronage,” Grant Chum, chief operating officer of the company’s Sands China, told investors on Wednesday on an investors relations call. “The patrons returning first to Macau are the high-quality, high-frequency customers.” It is enough to make Spy want a Portuguese tart.
Spy suspects a lot of amateur crypto investors had excitement running in their veins this week. Not only has Bitcoin broken through 13,000 again but PayPal said it would accept payments in Bitcoin giving the nascent currency a massive boost. Bitcoin has outperformed gold this year, rising about 160% since its low in March. With central banks printing as much as they want to finance record deficits, it does not surprise Spy one iota that investors are seeking a non-central bank inflation hedge. This genie is well and truly out of the lamp.
Everyone in finance loves a little compounding. How about computer compounding as an aside? Spy came across the latest figures on the number of transistors in a microprocessor. The growth is mindboggling. It is no surprise our phones probably have more computing power than Nasa did in 1980. Here is the growth trajectory since 1971.
1971: 2,300
1974: 5,000
1978: 29,000
1982: 134,000
1985: 275,000
1989: 1,180,000
1993: 3,100,000
1997: 8,800,000
2001: 45,000,000
2005: 228,000,000
2009: 904,000,000
2013: 4,200,000,000
2017: 19,200,000,000
2020: 54,000,000,000
So Trump and Biden had a lively go at each other this morning Hong Kong time. Spy watched it so you did not have to. (You’re welcome.) The debate was not as raucous as last time with the mic muting option. Spy jotted down a few of Trump’s punchiest lines:
• “With the possible exception of Abraham Lincoln, nobody has done what I’ve done,”
• “I’m not a typical politician, that’s why I got elected” [You can say that again – Spy]
• “Your 401ks will go to hell”
• “Look at China, how filthy it is! Look at Russia. Look at India — how filthy!”
• “This is the craziest plan that anybody’s ever seen,” Trump says.
Biden had fewer memorable lines, but this one stuck out for Spy:
• “The character of this country is on the ballot. Look at us carefully.” Indeed.
There has been precious little outdoor advertising of late. Hop on a tram in Central and one sees blank billboard after billboard. One of Spy’s photographers did spot this from Fidelity, though. They are promoting their Asian Bond Fund.
Until next week…
