Posted inFSA Spy

The FSA Spy market buzz – 31 March 2023

Retirement at Aviva Investors, inflation beneficiaries (maybe), Allianz Global Investors is going all in in China, BNP Paribas’ thematic outlook, UBS and Credit Suisse, Nasdaq performance and much more.

The old Roman way to keep people happy was to provide “bread and circuses”. The idea was simple enough: if people have full stomachs and something to make them laugh, they will forget about the elite’s profiteering and countless other economic ills. With the imminent arrest of former US President Trump, Spy can’t help but feel the world is being given a giant circus that will dominate every airwave for many tedious months ahead. If food prices come off a little, too, perhaps, just perhaps, the people might not notice that rapidly rising interest rates, falling property prices and high inflation is making everybody, everywhere, poorer by the day.

News reaches Spy that Scott Callander, the global head of distribution at Aviva Investors, is retiring today. Scott will be familiar to many in Asia as he was based in Singapore for a number of years and used to trip into the region regularly after relocating back to the UK in 2020. Spy wishes Scott well as he puts his feet up.

Spy is not 100% sure there is such a thing as a long-term “inflationary beneficiary” but that is not stopping the ETF market from trying to invest in them. Horizon Kinetics’s Inflation Beneficiaries ETF, another ‘paint by numbers’ strategy, invests in companies whose revenues are expected to increase with rising consumer, producer, raw material or asset prices without a corresponding increase in expenses. A very neat trick, if ever Spy heard of it. Apparently, the businesses that fit this profile include exploration and production companies, mining companies, transportation companies, infrastructure companies and real estate companies. Horizon has raised more than $1bn in the fund since it debuted in the US and now the company has added a European listing, too.

Join the queue! Allianz Global Investors is apparently seeking to set up a wholly-owned fund management company in China. According to the China Securities Regulatory Commission, the firm placed its application with the regulator this week. Allianz already has a JV in China with CPIC Fund Management and there has been no public comment on how this might affect that existing partnership, although Spy can only imagine that its future might be limited. The Chinese mutual fund market is currently worth about Rmb27trn ($3.9trn), according to Caixin.

BNP Paribas Asset Management, the giant French manager, has just released its quarterly outlook for the next three months and has a few ideas up its sleeve, especially for investors who like thematic investing. They have broken it down into seven areas:

  • Food security and alternative food sources: innovations in agricultural sciences (productivity and climate-friendly fertilisers for example), precision/vertical farming and ways to reduce waste in the value chain.
  • Climate-friendly: alternative proteins and sustainable packaging.
  • Reshoring and securing supply chains: industrial automation and product lifecycle management software.
  • Mining: alternative sources of industrial commodities and related technological innovation.
  • Efficiency, reuse and recycling: investment in circular economy leaders, plus focus on local production of energy, goods and services.
  • Water: technologies for water efficiency, recycling and desalinisation.
  • Cybersecurity and Safety: cybersecurity, personal and industrial safety. 

The fallout from the shotgun marriage of UBS with Credit Suisse continues to rumble along. Spy can only imagine the lawyers are licking their lips. Reports keep on surfacing that disgruntled bond holders are itching to get into a court room to discuss their AT1 wipe-out. Meanwhile, UBS and Credit Suisse are telling all and sundry that they desperately want all their Asian bankers to stay. In Spy’s experience, a mucky merger leads to high-quality staff bailing very quickly as few want to endure the pain of a mega reorganisation. Good luck with that.

Has normal business resumed? Take a look at returns from the Nasdaq 100 over the last five years. After an ugly year in 2022, the tech-heavy market is already up a healthy 19% year to date. It seems it is very hard to keep big tech down. And it is Big Tech – most of these returns are dominated by the 15 largest companies in the index.

2019: +39%

2020: +49%

2021: +27%

2022: -32%

2023 YTD: +19%

Every speculative investor wants to find a unicorn, correct? Unicorns are start-ups that become worth more than $1bn. Spy was amused to read a commentary arguing that what we need is not mythical unicorns, but rather very real camels. In the current era, it is camel-like companies that investors should be looking out for. After all, camels evolved to be resilient and they are adapted to brutal conditions that kill other animals. Camels may be slow, but they move across deserts steadily, surviving on little water and few resources. Dromedaries can endure harsh conditions and are as tough as old boots. Spy thinks it is not the worst analogy in the world. Hat tip.

Spy asked ChatGPT to write a poem about ETFs and another about mutual funds. Apart from the poems being utterly awful, Spy was amused at the key differences the AI engine chose to include:

Exchange Traded Funds, or ETFs,

A modern way to invest and bet,

They offer ease and diversification,

And bring a new level of innovation.


They help us diversify, with ease,

And offer liquidity, when we please,

Mutual funds, a reliable choice,

For those who seek to invest and rejoice.

Until next week…

Part of the Mark Allen Group.