“Do you want to know the four most dangerous traits among investors?” asked a veteran US equity portfolio manager of Spy this week at the newish Qura Bar in Tsim Sha Tsui. “One: fear of missing out (FOMO). Two: demanding certainty when none exists. Three: impatience. Four: gullibility. Every single one of those can sink your investments. Of all of these, however, FOMO is by far the most dangerous. Rushing in because the rest of the crowd is, is the surest way to poor house.” AI bandwagon investors, Spy thinks he was talking to you.
Different horses for different courses, as the saying goes. This week Spy spotted a new ETF that has a very specific appeal. Franklin Templeton has launched the Catholic Principles ESG ETF on a number of markets in Europe, including the London Stock Exchange. Naturally, the fund focuses on investments that match Catholic ethics, abstaining from investing in companies that make contraception and stem cell research as well as other ESG-favourites, oil and gas, arms and adult entertainment. As the investment world has embraced sharia investing, why not Christian investing, too? The best ticker is for the Italian version of the ETF, due to be launched soon: it is FAITH.
While Franklin Templeton has been happy to put the ESG badge on the fund above, Brown Advisory has been quietly dropping the ESG moniker from a number of its strategies – well, in the American marketing material anyway. In keeping with the trend of many US managers, who now find the term too politically toxic, the un-greening of funds continues at pace. Spy is waiting for a convincing alternative to take its place. We had SRI, then ESG, what’s next?
If Catholic-style investing is not your thing, how about robotics instead? Themes ETFs has just launched a Robotics and Automation ETF on the Nasdaq, which tracks the Solactive Industrial Robotics and Automation Index. The robotics and automated market is currently worth nearly $25bn annually already, but it is expected to grow to more than $60bn by 2028, according to Statista. This thematic, perhaps entirely in keeping with its investment thesis, automatically tracks the index. The fund comes with a cool ticker too: BOTT. The range of robotic devices is growing all the time, from basic home vacuum cleaner robots, home automation systems to full-scale industrial warehouse learning and management machines. This is one thematic that turns Spy’s head.
A little while ago, Spy noted that one of the most bullish things about the China market was how bearish investors had become across the board. It was hard to find too many positive voices – they were drowned out by the doomsters, As if by investment magic, the last few weeks have seen a delightful resurgence of the CSI 300, which is a capitalisation-weighted stock market index designed to replicate the performance of the top 300 stocks traded on the Shanghai and Shenzhen stock exchanges. On 24 February, the index dropped to 3179. Just over two months later it is at 3600, a healthy 13% pop.
Hat tip to the portfolio managers James Johnstone and Victor Erch at Redwheel. These intrepid managers have been running the rather exotic Next Generation Emerging Markets Equity Fund, which is a fancy name for frontier investing, for the last five years. Their fund, with about $680m in assets has risen 120% in that period versus a mere 2% for MSCI Frontier Emerging Markets Index. That is a pretty stunning outperformance and is the perfect example of why active investing is so vital in less developed markets. The fund gives exposure to Vietnam, Chile, Indonesia, Mexico among others and no doubt is filled with companies we have all never heard of but are making cash in their domestic markets.
Spy was wondering if he was in a time warp this week. A fund claiming 100% downside protection, while offering healthy upside, was being pushed across his desk. He had to check that it was not April Fool’s Day. The idea that there is upside potential with zero downside is Alice-in-Wonderland levels of delusion. Spy’s (probably unwanted) advice – if one of these comes your way, read the small print with a magnifying glass or, better yet, run a mile.
Spy was rather saddened to realise that one of Singapore’s Robo-advisory pioneers, Bambu, closed down at the end of last year after years of heroic attempts to become profitable. It follows in the footsteps of MoneyOwl and Smartly which have also shut their doors. These businesses, which rely on huge future volumes, at razor thin margins, are always in a race against time to survive. Spy salutes Ned Philips and the team for trying; being an entrepreneur is hard and sometimes even the best ideas with hard work is simply not enough.
Those reading the US economic tea leaves have a new (old) soundtrack to listen to. Those 1970s classic from the Bee Gees. Whichever way the Fed tries to spin it, stagflation is back. Rising prices with slower growth. Chairman Jay Powell must be getting a Night Fever.
Until next week…
