If there is one question that Spy gets asked more than any other by asset managers in the region, it is: “What do banks actually want to buy at the moment?” For the last few months that question has had a dull answer. “Not much and low conviction” was the stock response. However, Spy is prepared to risk his liver for his art, and over several bottles of Brunello di Montalcino this week with some industry contacts, some new answers started to emerge. The one consistent one? China. It seems the banks in the region have decided it is cheap enough and they sense value to be found. The other area of interest has been private equity. Anyone for a dim sum start-up?
In one of the industry’s worst-kept secrets, Spy can reveal that Ming Wong, who has been heading wholesale distribution at Janus Henderson in Singapore, will join Matthews Asia next month in a similar role. Ming, who has been with Janus Henderson for the last five years, has been lured to Matthews as it opens an office in Singapore with portfolio management capability. The firm recently lured Lindsay Wright as head of the region and chief operating officer for the San Francisco-headquartered asset manager. Matthews’ stand-out over the last three years is its China Dividend fund, which is up more than 52%.
Specialist boutique credit and financials manager, Algebris Investments, has added to its team in Singapore, notes Spy. Alistair Mackenzie recently relocated from London to the Lion City to beef-up its local wholesale sales function. He reports into local MD, Richard Surrency. Algebris has proven to many doubters that even with a low-profile brand, it is possible to gain private bank access. Spy understands that Algebris has already managed to get placed on the majority of tier-one platforms in the region. Algebris’ Financial Equity fund has delivered an annualised 19% for the last three years.
Eastspring has also been strengthening its team. The Asian asset management arm of British insurance giant Prudential has hired Edmund Lim from Goldman Sachs, where he led the Southeast Asia financial institutions group. In his new role, which starts in November, he will be head of corporate development. Eastspring recently bought TMB Asset Management in Thailand, and, Spy would suspect, with this addition, the market can expect more deal-making in the near term from the $180bn manager. Its North American Value fund is up nearly 10% over the last year.
As the saying goes, when all you have is a hammer, everything looks like a nail. Spy loves active management because it is about seeking-out opportunities and not passively betting that all boats rise with the tide. Some strategies, undoubtedly, benefit from a passive approach – US large-cap springs to mind. However, small-cap anywhere, credit, emerging markets, frontier and a whole host of other sectors seem far more suited to active. And, if there is one area where active seems an absolute must, it is in the world of ESG. This specialist field of expertise requires a lot of research and truly innovative thinking. Yet that has not stopped Vanguard launching two ESG ETFs in the last few weeks: Vanguard ESG US Stock and Vanguard ESG International Stock. This surely looks like a bandwagon trade, if ever Spy saw one.
Spy has to ask what some investors have been smoking. The excitement over marijuana stocks has reached ridiculous proportions. Canadian pot company Tilray, after its recent IPO, is worth approximately $29bn (a 672% rise since the IPO in July) even though it had revenues of a paltry $17m upon which it generated a loss of $18m in the first half of the year. No major institutional shareholder has more than 1% of the stock, but Spy did not notice, according to Morningstar, that Fidelity owns 0.24% of the company, probably through a fund of some sort. Assuming the firm got in before the IPO, that may indeed be considered a “high” return.
The European Fund and Asset Management Association (Efama) published some stats this week on total fund assets in Europe, notes Spy. The industry now has more than €25trn in AUM. Of that about €13.1trn was in funds and €12trn in discretionary mandates. Why is this important, you ask? Well, for Asia it is about the direction of travel and what to expect as the region develops. Most commentators state blithely, and frequently, that 80% to 85% of AUM in the private bank space in Asia is advisory and that the remainder is discretionary. However, Spy heard from a reliable contact recently that in the last year or so, UBS has actually had about 70% of new money go into discretionary mandates. As Bob Dylan sings, “The times they are a-changin’”.
A picture is worth a thousand words. Sometimes it is hard to disagree with this pithy assessment. Last week in Bangkok at the FSA Forum, Franklin Templeton, shared an image of the Rio underground train system in comparison with that of Shanghai’s over a 20-year period. Alistair Macdonald, the presenter, pointed out that whilst people get very concerned about China’s huge debt, sometimes investors should remind themselves what that debt has actually bought them. In Shanghai’s case, that is a whole lot of shiny, new, underground trainlines. In contrast, Rio has some crumbling and disused stadiums after its debt-fuelled World Cup and Olympic vanity extravagances. Not all debt is created equal, nor buys an equal investment.
The US stock markets have been teasing investors with new highs, but looking at asset management share prices this year, it is hard to see that. The listed asset managers that Spy tracks are mostly at the bottom of their 52-week ranges. One company beating that trend, however, is Alliance Bernstein, which is near its one-year high this week and is in fact flirting once more with its five-year high. Of its nearly 40 funds listed by FE that are available in Hong Kong, only one is negative over three years. Hat tip!
Spy’s photographers have spotted some new advertising in Singapore this week. Franklin Templeton is pushing its emerging markets theme hard via a giant advert underneath Ocean Financial Centre.
Until next week…
