Posted inNewsFSA Spy

The FSA Spy market buzz – 26 July 2019

Blackrock loses; First State’s half century; M&G ESG; Selling frontier; Standard Chartered’s fund selections; FMP dullness; advertising from Ameritrade and much more.

Spy, like so many other Hong Kongers, has been watching the escalating street protests with a mixture of pride and caution over the last few months. Rumours have abounded this week from humming Whatsapp groups of all sorts of dramatic government responses to try and end the drama. For every cloud there is a silver lining though. For once, Hong Kong’s eye- wateringly high hotel rooms seem to be on the bargain rack. One visiting PM told Spy he was staying at five-star establishment in Admiralty that usually costs a kidney, for sums of money that can only be described as a pittance. It may be just the summer lull, but Spy suspects that the widely-broadcast images are starting to take their toll as business people avoid travel to the city altogether. Spy has, unfortunately, not as yet, seen any corresponding drop in single malt whisky prices. That may take a few more weeks…

News has reached Spy that Doris Ma, who was head of retail marketing for Asia ex-Japan at Blackrock, based in Hong Kong, has stepped down from the firm. Spy understands that Doris has moved to Toronto for family reasons. Spy has no news yet of who is replacing her. Spy is convinced Doris will feel right at home in Canada as it has practically become Hong Kong’s second country with all of the movement to-and-fro between the two. Blackrock’s AUM is currently about $6.5trn as the fund behemoth continues its seemingly unassailable pace of fund gathering across the world. Unsurprisingly, with precious metals bouncing as they have this year, the firm has had success in the last twelve months with its World Gold Fund, which is up 23%.

Over the last month, when the Cricket World Cup was being played in England, there was much talk of half centuries. Spy understands a rather more exciting half century has just been achieved in Singapore by one of our industry’s more distinctive firms. First State Investments is celebrating 50 years in the Lion City this year. The company has been active in Singapore for nearly as long as the country has been independent. First State, rather famously, is one of those firms happy to close a fund that has reached the size its PMs feel will constrain their ability to deliver outperformance. Spy has always admired this in a world when the pressure to gather more AUM is relentless. Spy understands a rather lavish party, with cocktails galore, will take place at the Fullerton Bay Hotel in early September. It sounds just like Spy’s sort of caper!

The rapid transformation of every corner of the asset management industry to an underlying ESG philosophy continues at pace. This week, M&G added an ESG Emerging Market Credit Fund to its list of wares. The fund will be managed out of London by Charles de Quinsonas and supported by the head of EM debt, Claudia Calich. As Europe swelters in another heatwave and the cries for radical action to thwart climate change get louder, this will inexorably lead to more pressure on the entire finance industry to hunt for sustainable solutions everywhere. The ESG trickle that started a few years is now a veritable flood.

How do you sell a frontier market fund? Spy recommends the ‘frontier’ players take a leaf from the high yield playbook and simply change the name. High yield ditched “junk bond” and never looked back. For frontier, all that is required is to name it “small cap” general emerging markets and immediately one removes the stigma of illiquid, poorly-regulated, exotic destinations. The fund may, indeed, be playing in that treacherous pond, but fund selectors and investors are now so used to EM that they won’t have to draw in quite so much breath to get it across the line.

How have fund selection teams done this year? Spy was reviewing the top fifteen performing funds over the last year on the Standard Chartered retail fund platform in Singapore

Out of those fifteen funds, five of them were on their focus or ‘select’ list. Spy thinks 33% is a rather impressive hit rate considering the platform has 700 funds and less than 20% of those are select ones. It is fair to say the team have ‘outperformed’. The top hit for the team has been Blackrock’s Asian Tiger Bond Fund, up nearly 9% over the last year.

Spy lamented last week that the only thing shifting in this moribund market within private banks in Hong Kong and Singapore are FMP solutions. No equity, no dynamic bonds, no property – nothing. This summer fund sales people without an FMP may as well watch paint dry. Sadly, chatting to industry colleagues this week, Spy has heard that this malaise has spread across Southeast Asia like some rather virulent disease, as Thailand and Malaysia also succumb to the torpor. Never has a market correction been so needed, if for no other reason than it gives the bankers a chance to talk to clients about more realistic valuations. Spy cannot remember a situation in recent memory when the main reason for a lack of fund sales is a market that relentlessly grinds higher. The world is currently a strange place indeed. Spy is reminded of some of the wisest words ever attributed to a Persian sage: “This too shall pass.”

In Singapore, Spy’s photographers spotted a campaign by Ameritrade hoping to persuade consumers to “diversify their portfolio with futures”. Spy has never really felt ordinary consumers have much skill in this department. But if Singapore has casinos, why not a bit of 100:1 leverage on some silver futures, too? What could possibly go wrong?


Until next week…

Part of the Mark Allen Group.