“Hong Kong has often been a trendsetter,” remarked Spy’s drinking companion on Wednesday evening. “It is rather unfortunate that on this occasion, it is a trend that is most unfamiliar to this extraordinary city.” My portfolio manager confidante was of course referring to the ongoing unrest. “Around the world, people are taking to the streets: Barcelona, Santiago, London – people are airing their frustrations – and this is not going away any time soon. A summer of discontent is turning into a dismal autumn and a winter.” When a parking lot in Hong Kong can sell for nearly $1m, are policy makers terribly surprised that ordinary people think they are getting a raw deal, wonders Spy?
American Century Investments has sent a strong message to the market that it intends to build a decent wholesale franchise in Asia, thinks Spy. This week Vicky Yick, an experienced distribution specialist, who was formerly with Value Partners in Hong Kong, has started her role as managing director of Asia intermediaries at the firm. American Century is headquartered in the midwestern city of Kansas City, Missouri, on the state border of Kansas, a place most people only vaguely remember from the Wizard of Oz. More pertinently, ACI’s primary owner is the Stowers Institute for Medical Research. ACI’s own dividend payments support the Institute’s work of uncovering the causes, treatments and prevention of life-threatening diseases, like cancer. Many asset managers “talk” about impact investing, but Spy thinks American Century is doing more than just talking. The firm has had success in the last year with its Focused Dynamic Growth Fund, up a healthy 18%.
Did you hear about the massive rush to buy hedge funds in the last quarter? No, neither did Spy. The word seems to have well and truly permeated into the market. Hedge funds have underperformed, continue to generally underperform and to charge a lot of money for that underperformance. According to E-vestment, investors yanked $30bn from the hedgie industry in the last quarter – a trend that has persisted for 18 months. An industry built on 2- and-20 seems to Spy more like an industry where 20 hedge funds won’t last another 2 years. Or something like that.
A few years ago, FTSE 100 wealth management giant St James’ Place bought minor Asia wealth manager Henley. That business is steadily growing its number of advisors, or partners as the company refers to them, and assets in Asia continue to grow at a fair clip. However, asset managers hoping to be part of that growth may be sorely disappointed. Spy has just seen their latest quarterly results and in Asia, assets in “third party funds” grew a mere £4m to £342m from £338m. What does that mean? New funds are all going to their inhouse offering. For SJP it is all about captive distribution. And SJP is not alone, Spy can think of a significant number of private banks whose inhouse offering reaps a disproportionate share of new money. It is why true open architecture players such as Stan Chart, Citi and DBS remain vital to the asset management industry in the region.
The barriers keep going up. No, Spy is not talking about unrest in Hong Kong. This week, Jupiter AM’s Mitesh Patel, points out that Japan is now trying to be highly protectionist with its stock market. New rules restricting foreign investment on national security grounds have been proposed that have alarmed asset managers. It is a move described as “truly idiotic” by the head of the Tokyo Stock Exchange, writes Mitesh. Spy can just imagine the outcry this would have caused if it had been Trump’s proposal. The Bank of Japan already owns about half of the equity on the TSE so this seems a rather bizarre move. Another strange omen of our times.
Spy loves visiting France. Spy loves drinking French wine, eating French cheese and enjoying innumerable artworks in French galleries. Spy would not, however, wish to do business there. The country’s laws seem at times to be designed to stop business rather than help it get along. The World Bank has taken notice and this week announced that China is now an easier place to do business then the venerable Fifth Republic, rocketing from 46th pace to 31st. The direction of travel within China is clear – it is opening up and cutting red tape regardless of what the EU and the USA think. New Zealand, Singapore and Hong Kong take the top three spots again. Is it any wonder that Hong Kong is filled with so many French expats?
2019 has been a year of anniversary celebrations. In April Bordier celebrated 175 years of private banking, in September First State celebrated 50 years in Singapore itself. Now Eastspring has reminded everyone it has reached its quarter century and is celebrating being 25 years old. It has launched a special website, www.eastspring25.com, to tell the story. The asset manager is convinced we are living in the Asian Century and Spy finds it hard to disagree. The firm is predicting that total Asian client assets will reach about $91tn by 2025. That is a number worth celebrating, too.
Spy is prone to being a curmudgeon from time to time. This week, his peeve is asset management insight pieces that are so dull they make insurance actuarial tables look exciting. Spy would like to gently remind managers that we live in a Netflix and Instagram world – vivid beauty, drama and style. If an asset manager really thinks its clients (even instis) will dutifully read a 25-page report with impenetrable graphs, dense language and arcane mathematics – they are simply living in dreamland. In 2019 there is no excuse for such output. If an asset manager is going to say something interesting, one also has to make it look interesting, too.
Yield. Yield. Yield. It is the word Spy hears more often than anything else in his day-to-day world in Asia. Looking at the front page of Bondsupermart one gets a little insight into the risks Asian debt buyers are taking. Four of the top five most active bonds are yielding 9.5% or more and one is at 20%+. Spy suspects a little car crash is around the corner.
Spy’s photographers have been hunting for advertising in Hong Kong and Singapore. In a devastating sign of the times that in Central, billboards and tram stops which are usually covered in financial or luxury goods logos, are sitting bare.
No self-respecting marketeer wants to risk putting their brand in place where it might be photographed with protestors. Spy has even heard that some companies have stopped giving out umbrellas with their own logos in Hong Kong for similar reasons.
Until next week…
P.S. Spy and FSA wish all their Hindu readers a very happy Deepavali.
P.P.S Spy’s prediction of a Wales win for the Rugby World Cup runs into proper competition on Sunday as the Welsh Dragons take on South Africa’s Springboks. Spy is still confident that Wales will prevail, despite their lucky win over France last weekend.
