The FSA Spy market buzz – 24 May 2019

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HSBC Private Bank retirement; Changes at Aviva Investors and China Asset Management; Structured products; Insti and wholesale merge; advertising and much more.

It is a banality that the times are always changing, observes Spy. “Change is the only constant” and other pithy lines get trotted out ad infinitum. But what is true, is that, at times, the rate of change accelerates and accelerates dramatically. Spy has noticed one accelerating trend above all in our asset management industry: the demise of the friendly, personality-driven salesperson. Asset management used to be the domain of lazy lunches, golf sessions and excellent entertainment, all suited to the boisterous extrovert. Now, the industry is hunting people with deep technical skills and relationship building skills are a secondary factor. With regulators increasingly keen to prevent client entertaining at all, it portends a much duller industry in the future, and that will be the real shame.

In news that will surely dismay dozens of fund salespeople, Spy has learned that Michael Christo is retiring from HSBC Private Bank. One of Asia’s friendliest faces in the discretionary camp, Michael has been a prominent name in Hong Kong for two decades. With a long career at UBS and then this final stint at HSBC, Michael developed a reputation for an insightful and pragmatic approach to wealth management. Hong Kong’s loss is Toronto’s gain, which is a return home for him. Michael has helped Fund Selector Asia, sitting on our editorial advisory board, which provides regular feedback to our team. Spy and the entire FSA team wish Michael a well-earned, happy and relaxing retirement. A search is currently being held for his successor.

In another departure from Asia for a friendly face, Spy has learned that Peggy Wu, Asia marketing head at Aviva Investors, is relocating to the US from Singapore. Spy understands that Peggy’s husband has been offered an exceptional role in the US, which has prompted the change. Peggy was previously with Janus Henderson and has held a variety of financial services marketing roles in the US. There is no news yet of her replacement. Aviva Investors has had success in the last year with its Global Equity Endurance 2 fund, up 15%.

Spy has learned that China Asset Management’s Hong Kong arm has recently lost its vice president of sales and marketing, Ivy Tse. There is no news of her replacement or where Ivy has moved to. China Asset Management is headquartered in Beijing and is one of the largest managers in China with more than 40,000 institutional clients and 49 million retail clients, according to its website. The firm has had success in the last 12 months with its Select Asia Bond fund, up 7%.

Speaking to numerous industry players in the last few weeks, Spy has heard more about structured products than he cares to. It seems the lure of “guaranteed” products, or products with highly complex terms that reference dozens of different underlying securities are back in vogue. Surely those juicy fees have nothing to do with it? In early May, Bank of Singapore held a seminar on the subject with hundreds of attendees including investment bank and asset management partners. In Spy’s humble experience, investment banks typically get into structuring when their bread-and-butter business of financing large projects takes a dip. Spy wonders whether this is another canary in the slowing economy’s goldmine?

This week Spy spotted an article by Nicolas Faller, the co-CEO of UBP Asset Management arguing that the distinction between institutional and private clients has faded to the point of irrelevance. Spy could not agree more with the premise of the article. Pressure on fees, the search for yield, exotic diversification all point to very similar demands from both client sets. Nicholas points out that clients increasingly want highly-detailed reports from managers on their sources of return, something institutional clients have demanded for decades. In the wholesale market, Spy also notices the “institutionalisation” of the fund selection process – RFP’s for banks are now common when just a few years ago they were a rarity. The times, they are a changing.

Over the last twenty years, received wisdom would be that healthcare and tech have been the two best performing sectors in the global stock markets and that would probably be right. As this table shows, however, the surprising best single stock performer in the S&P 500 is a humble energy drink manufacturer, Monster Energy. Spy would like to give a hat tip to Blackrock, too. It is not merely the only asset manager in the top twenty, but in fact the only financial services firm to crack the top twenty. Close observers of Blackrock have spotted a firm transform from a traditional asset manager into a tech giant and ETF behemoth. Spy may well be incorrect, but he can’t find a single Blackrock fund that has managed to outperform its own stock over the last 20 years:

Spy’s quote of the week comes from Morgan Housel of the Collaborative Fund: “What makes people happy is having options – doing what you want, with who you want, when you want, where you want. And options come from savings and assets, which are the opposite of spending.” Nailed it.

Spy’s photographers have spotted some new ads out and about. First up, Allianz Global Investors has gone big in Singapore’s Raffles Place MRT pushing their Asian fixed income solution and banging their drum for active management. Judging by the number of distributors they have on board, expect to hear a lot more about this strategy:

Schroders has been running a print campaign that is happy to talk about the lateness of the economic cycle and the implicit dangers that it brings. That is looking like an increasingly good bet as markets wobble:

Until next week…

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