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The FSA Spy market buzz – 24 April 2020

Change at M&G; Jupiter and Ping An add; BNY Mellon’s ETFs; New funds on FSMone; Blankfein’s candour; Ratings shmatings; Crypto maturity; Munger’s Wisdom and much more...

There has been much elation in Spy’s house this week. Spy was allowed out to Central for a dinner. Yes! Dinner in a restaurant. With a waiter. With other people and craft beer on tap instead of something dull from a bottle. Small mercies! However, the conversation remained the same. “The world has gone crazy and the virus is a giant pain in the bottom.” It does seem that Covid is getting to some people. This week the mayor of Las Vegas, Carolyn Goodman,  suggested the city should be a test bed for opening up and labourers will just have to take their chances and they will see how many people die. We know Vegas is a gambling city but that seems a risk too far? Although, Spy would not put it past the governor of Macau thinking something awfully similar…

News has reached Spy that Carmen Tse, M&G’s senior Apac marketing manager for institutional business, has stepped down from the firm. Carmen was originally based in Hong Kong but for the last four years has been in Tokyo. Spy has no news of where she is moving to or whether she has been replaced yet.

In all the virus excitement over the last few months, Spy failed to report a few people moves. He makes amends now.

Joanne Siu has joined Jupiter in Hong Kong as sales director. Joanne was previously at Samsung Asset Management, best known for its range of ETFs, for nearly four years. Joanne is working alongside Tony Yu, Apac sales director and of course, Peter Swarbreck, who manages the business in Asia overall.

The other move Spy noticed was that Helen Huang has joined Ping An of China Asset Management in an institutional business development role. Prior to this switch, Helen was at Legg Mason in Hong Kong for nearly eight years, focusing on product marketing for the firm. Helen began her career as a reporter for iMoney Magazine.

It has been a very quiet period for new fund launches, understandably. That is not to say nothing has been happening. Spy spotted that BNY Mellon Investment Management has added three ETFs to its range in April. BNY is a latecomer to the ETF market but now has eight of its own products. The new launches are core holdings: large-cap, mid-cap and small-cap. These are, Spy imagines, defensive building blocks for the firm and may even be used by their own managers instead of sending money to iShares or Vanguard. The Large Cap Fund has a 0% charge while mid and small are both listed at 0.04%.

Similarly, at FSMone in Singapore, which had practically no new funds added to the platform in March, a few new strategies have arrived. According to Spy’s tally, 13 new funds made their debut so far in April. Neuberger Berman added its US Small Cap fund, First State added the Global Emerging Markets Focus fund and HSBC GAM added its recently launched Asia High Yield Bond Fund, among others. Incidentally, all of FSMOne’s top-performing funds in the last month are gold and precious metals funds with not a single one up less than a staggering 50%.

You know how it goes. You are the CEO of a globally important, systemic bank and you have strong opinions. But politics, central banks and downright good business acumen mean that you have to bite your tongue, often, thinks Spy. Well, it seems that Lloyd Blankfein, former CEO of Goldman Sachs, is enjoying his time out from Wall Street by saying the previously unsayable.  He tweeted yesterday: “In finance, most surprising to me is that despite the trillions the US is adding to our budget deficit and national debt, investors (many foreign) will lend the US a virtually limitless supply of dollars for 0.6% for 10 years.” A few years ago, Spy imagines, he would have been in front of a Senate Committee by sundown to explain, “That surely, what he meant to say, was it is very sensible for all these foreigners to accept such a good deal and they should keep buying indefinitely.”

Was that the sound of a gate banging, wonders Spy? Fitch Ratings, has identified no less than 76 European funds that were gated in March. The majority of those were domiciled in Luxembourg and therefore almost certainly available for sale in Asia. No doubt, many of these funds were property-related, but not all. The funds cumulatively had $40bn of asset under management. Just another odd omen taking place in a rather odd world.

Speaking of ratings, Spy, it seems, is not the only one who is wondering whether credit ratings agencies matter these days. With central banks increasingly willing to buy junk bonds and all countries printing money like crazy, the market seems to ignore the ratings agencies anyway. Will an investment grade rating be that important if a sovereign can buy your paper anyway? Apparently, in private, one large Swiss Private Bank CIO is reported to have said, “If the artificial distinction of an IG rating is also to be ignored, it will be interesting to see if CRA pronouncements matter in the future.” That might just shake up staid bond fund presentations.

Spy has lost count of the number and value of debt relief programmes, bailouts, grants and other assorted monetary tools that have been deployed in the last six weeks. However, if there is one area we can all agree, it is that Central Banks have entered new territory. The combined balance sheets of the Fed, BoJ and ECB alone, has reached $18.02 trillion this week, according to Seb Investment Research. To put that in perspective, it is 20% of global GDP. It has grown by $14 trillion since 2008.

Source: Seb Investment Research

Spy has always thought of the Crypto crowd as one step beyond the tin hatted gold bugs brigade. However, a report this month from Bloomberg is giving Spy pause for thought. The report argues that bitcoin, in particular, is maturing rapidly and during this crisis has in fact proven its worth. The report states, “This year marks a key test for bitcoin’s transition toward a quasi-currency like gold, and we expect it to pass…” (Spy’s emphasis). With central bank printing out of control and only so much space for that rare art collection…

People love to quote Warren Buffet, but Spy thinks Buffet’s partner Charlie Munger has had just as many good lines over the years. With earnings season underway, Spy suggests one remembers this little gem from Charlie: “I think that, every time you see the word Ebitda, you should substitute the words ‘bullshit earnings’.”

Until next week…

Part of the Mark Allen Group.