Posted inFSA Spy

The FSA Spy market buzz – 29 September 2017

Movement at JHI; Citibank shuffles; changing brands at Schroders; rapping in China; benchmarks and Brandywine; China demographics and much more...
The FSA Spy market buzz - 19 Jan 2018


Spy’s unwavering commitment to finding the juicy gossip that drips from the darker corners of Asia’s asset management industry has required enormous sacrifices from his liver. For experienced hacks and spies know that alcohol (along with its ugly sibling, flattery) is nature’s best truth letter. The truth flows out as the spirit flows in, as one wise Celtic proverb puts it. Fund analysts and selectors may well take a note from Spy’s notebook: after all, the sober fund salesman is unlikely to tell you that “the manager is about to appear in a national newspaper scandal about giving a vintage care to his prostitute-turned-mistress” or “we are so exposed to Russian junk grade bank debt it will make your eyes bleed”. In short, to avoid the surprises, occasionally ditch the Morningstar terminal for an evening and head to a bar. It may cost your liver something, but save your clients a whole lot (For the record, the above advice applies equally to portfolio managers: ditch those dreary sell-side reports and take company managers for a beer).

News reaches Spy that Asia is going to lose one of its most experienced asset management practitioners. Alex Henderson, who has been in Asia more than 20 years, is moving back to the UK from Singapore next year. Alex has overseen the tremendous growth of Henderson Global Investors in Asia and, more recently, the combined business of Janus Henderson InvestorsSpy understands that Alex is not retiring, but will take on some new activities for JHI, looking at several new markets and will remain a roving ambassador for the firm. JHI has not announced a successor and Spy understands internal and external candidates are being considered. Watch this space.

Citibank has had a little change in its fund team, hears SpyChintamani Dagade, who was involved in fund selection and analysis with a particular focus on the NRI channel of the bank has moved internally. Chinta has taken on a business development role within Citi Private Bank focussing on global non-resident Indians and Citi Private Bank’s India business. There is no word yet if a replacement has been found for Chinta’s specific fund selection role.

What’s in a name? Cazenove, the private banking and wealth management arm of Schroders has decided to rebrand itself Schroders Wealth Management. Initially the wealth manager was named Schroders Private Bank, then it became Cazenove, in line with its London-based counterpart, presumably to differentiate itself from its parent. It seems that the local management team has decided that, after all, the Schroders name is so well known with Asian clients that the recognition overrides any perception of favouring only Schroders solutions. On the 26th of October, SWM will hold an annual investor day. Complementing traditional investment presentations, Spy understands Dominic Khoo, one of Asia’s best-known horology experts, will be sharing his thoughts on the latest special editions and valuable rare models of watches. Time, on or off your wrist, is certainly the investor’s friend in Spy’s opinion.

Is CSOP channelling Eminem? In an online advert, the Chinese asset manager has created a rap song promoting its ETF range, with lyrics that include not only the ticker symbols of the funds, but a description of what the funds invest in. Spy’s Mandarin can be a little patchy at times, but he believes the opening lyrics include CSOP’s Chinese company name, Nang Fang Dong Yi. Could this herald peak-ETF? Spy recalls that at the height of the dot com boom, a dreadful, soon-forgotten song was written that included the first recorded instance of a domain name being used in pop lyrics. The novelty garnered press attention for sure, but also coincided with the end of that ludicrous bull market. Just sayin’.

Spy heard a fine expression this week: “The tyranny of the benchmark.” The words were uttered by Brandywine Global’s multi-sector investing portfolio manager, Brian Kloss. Brian highlighted to fund selectors in Kuala Lumpur a benchmarking irony: modern fixed income benchmarks all but guarantee that the largest issuers of debt form the bulk of the index. The index, therefore, says absolutely nothing about their creditworthiness. He rightly points out that large debt issuers are likely to be less creditworthy. If ever there was a case for active management away from a benchmark, this must surely be it.

What kinds of funds do banks in Malaysia find it easiest to sell to their clients? FSA’s team asked attendees of the KL Investment Forum just that question this week. Fund marketers and sales people, to save you from the heart-stopping suspense, just put the target return or yield in big, bold unmissable letters on the front of your literature. More than half of respondents polled said it was the yield or return that investors went for. Only 20% felt geographic location helped sell a fund.

In the boisterous debate about China, demographic arguments come in and out of fashion. Spy spotted data from the World Economic Forum referenced by BMO Global Asset Management highlighting China’s enormous baby challenge. “China’s total population is expected to peak around 1.44 billion around 2030 but the working–age population (defined as those aged between 15 and 64) has already peaked. Over the next 25 years it is forecast to drop by around 130 million and by the end of the century will be roughly half today’s level.” In China, the numbers are always staggering, notes Spy.

In survey after survey, Spy has noted a lack of enthusiasm for buying US equities of late – usually on valuation grounds alone. They are so out of favour, Spy is wondering whether the contrarian play is, in fact, to back the US market even at these elevated levels? What if Trump actually succeeds in simplifying the mind-bogglingly complex US tax code? The Donald is trying to get the US corporate tax down to 25% according to a blog post by FidelitySpy reckons many of the Orange One’s sins would be instantly forgiven by companies if he pulled that off and that, in turn, could lead to much higher prices of equities as they announce huge domestic investment to reward Donald.  Just a lazy Friday thought from Spy.

Spy was casually reading the paper in Hong Kong this week when a new JP Morgan Asset Management advert popped out. The American giant is promoting JP Morgan Asia Equity Dividend Fund – unsurprisingly, not a mention of Bitcoin…

Meanwhile, in a sort of asset management “Fast and Furious”, one of Spy’s photographers spotted a Fidelity and Franklin Templeton bus drag racing – well not really drag racing, it was Singapore after all.

Until next week…




Part of the Mark Allen Group.