Spy indulged in a particularly good Sangiovese last night with some members of a rather discreet Hong Kong-based family office. After the third bottle, their usually guarded thoughts on private banks and asset managers tumbled out. “Most of these guys have no idea”, lamented the punchy scion of the family fortune. “In late December they were screaming the end of the equity bull market and an impending slump in the dollar, encouraging me to move to cash. It is now May and markets have done nothing but rally and the dollar is on steroids.” 2019 has certainly be a contrarian’s paradise, notes Spy. However, with more than a touch of sympathy for the both bankers and asset managers, Spy did point out that hindsight is a rather magical thing.
Results for the first quarter of 2019 have been coming in for asset managers and Spy has found the same message repeatedly for active managers. Net flows in Q1 have been negative but in fact AUM has been rising due to the strong rebound in equity and bond markets. Janus Henderson is a rather typical example of this trend. $7.4bn of net outflows, but a $28.8bn rise in actual AUM. Jupiter, too, for example, had a net outflow of £500m, but AUM rose £1.4bn. At times like these, asset managers must wonder what they need to do to convince clients to stick with the programme.
Nothing like rising markets to get the margin traders out and about. Since February 1st, Chinese mainland investors have increased their share trading margin by a whopping 35.7%. Outstanding margin debt, the value of shares that investors buy with borrowed money, reached 964.9 billion yuan ($143bn) when the markets closed on Monday according to data from the Shanghai and Shenzhen stock exchanges. Nothing quite says “hot money” than shares bought on margin. Spy notes, that in life, and in the stock market, what goes up, must come down – eventually.
OCBC Wealth in Singapore has chosen Fidelity’s Global Multi-Asset Income Fund for its “weekly investment idea”. This is not too surprising considering the amount of promo Fidelity is doing in Singapore for the strategy at the moment. According to OCBC’s blurb, which is no doubt true of the fund, “This investment strategy enables the fund to deliver income and moderate capital growth over the medium-to-long term.” It always strikes Spy as slightly odd to have a long-term MA income fund as one of their “weekly investment ideas” when it would probably be best forming the core of retail investor’s portfolio. Perhaps OCBC should have a “Decade Investment Idea” bucket, too.
In New York yesterday the, eh, animal spirits really got running with the IPO of Beyond Meat. Shares of the plant-based meat maker (if one can actually buy into that term) – which priced its IPO at a humble $25 a share on Wednesday evening – began trading at $46 shortly after midday on the Nasdaq exchange, and then promptly surged to a rather stunning $65.75 by the end of the trading session. That made for a juicy gain of 163%. Shares were up another 4% after hours. It was the greatest IPO surge for an American company with a market cap of at least $200m since 2000, according to Dealogic data. Spy is much more of a real meat, rare steak kind of a guy, but it is hard to ignore this kind of enthusiasm for a company that only had revenue of $33m last year. The closing price valued the business at $3.8bn. Nothing terribly vegan about that.
Remember that phrase “hunt for yield”? Spy has a sneaking suspicion it ain’t going away any time soon. This table below shows government bonds of 19 countries. Only the US manages to be positive along the curve. If anyone is vaguely surprised at the strength of the mighty dollar of late, look no further than exhibit A:
A few weeks ago there was muttering from activist advisory firm, Glass Lewis that shareholders should turn down a non-executive board seat for Leonie Schroder, the daughter of late Bruno Schroder. When it came to it, the shareholders rejected Glass Lewis’s advice and overwhelmingly voted for Leonie to join the board despite her perceived limited financial services experience. The Schroder family controls nearly 48% of the listed British asset manager through its various investment vehicles, so not exactly a shocker there.
UBS was given a hard time by its shareholders this week over a €4.5bn ($5.02bn) penalty the bank had to pay in France for a complicated tax case to do with wealthy clients. Spy could not help but note that the UBS board meeting looked rather like a dystopian film’s idea of faceless committee. The word that does not spring to mind is: “diversity”.
Spy was disappointed to see that the latest marijuana ETF to come to market has, like others, plumped for a rather conservative name. The AdvisorShares Pure Cannabis ETF has chosen, for some obscure reason, the ticker YOLO. Spy would far prefer something like “HIGH” but in all the rush for cannabis profits, Spy notes the industry continues to prefer euphemisms instead of honestly highlighting the main reason for the phenomenal growth in the sector.
Browsing through private bank websites, it seems the marketeers feel compelled to regularly curate sophisticated ideas that should appeal to their wealthy clients. JP Morgan Private Bank has its Next List, which is pushing books, art, theatre and tennis
Citi Private Bank is excited about art, too, reminding clients of the importance of Art Basel in Hong Kong and rising global Instagram-driven star, KAWS.
Meanwhile, Julius Baer is reminding its clients of ancient Greek Stoic philosophy and living the life that is worth living
Spy would argue that a little Stocism may come in handy if market volatility picks up this year.
Spy’s photographers have spotted a new branding campaign by T Rowe Price in Central Hong Kong. The ram remains as confident as ever:
Until next week…