Spy found himself in Thailand this week drinking a local "Whiskey", called Sang Som, a misnomer if ever there was one. Sang Som is really a rum and and the molasses taste still lingers long since Spy has returned to his haunts elsewhere in Asia. The mood in Bangkok was, oddly optimistic, despite the region's obvious challenges.
That said, Thai fund selectors were very clear about one thing: they are selling emerging markets and buying just about everything else but their real preference is for alternatives. 54% of attendees to the FSA Bangkok Forum are reducing EM exposure while indicating that 70.8% of the delegates will increase their allocation to alternatives. One fund selector confided in Spy, "Don't believe this multi-asset run here will last. We are just hedging our bets for now. Thais prefer to buy specific asset classes and that will come back sooner or later."
Do fund groups put only their worst funds into the MPF fund range in Hong Kong? Spy could be forgiven for thinking so. Of the 449 MPF funds listed by HKIFA, in their most recent monthly MPF report, 382 of them are negative on a one year basis. That means 85% of all MPF funds are down over the last year. What is the worst performing actively managed MPF fund, asks Spy? The BCOM Joyful Ret MPF-BCOM China Dynamic Equity (CF) is listed as down 25.21% and adds insult to injury with a top quartile expense ratio of 1.93.
Is the ETF mania stopping any time soon, wonders Spy, cursing the lingering second glass of Sang Som. This week Goldman Sachs AM has launched their first ever ETF, a smart beta, or in their marketing speak "ActiveBeta" fund. Goldman, late to the ETF party, is charging an eye-poppingly low 9 basis points for their ActiveBeta U.S. Large Cap Equity ETF, although it will be a bit more pricey abroad, 37bps reports the FT. According to Bloomberg, there is now $420 billion in so-called smart beta ETFs. FSA's sister publication, Portfolio Adviser, reported this week that UBS GAM, not be left out, has launched 8 smart beta funds this week, targeting the US and Europe. With Goldman playing catchup, Spy notes that the iShares juggernaut seldom misses a trick as it launched its first Saudi Arabian ETF this week. Hat tip to the BlackRock boys and girls, the ticker is KSA. Excellent!
Has Will Shum, Fundsupermart's portfolio manager in Hong Kong, inadvertently put into words what we have all been thinking? Spy assumes it is a simple typo and he meant "premature" but in a gloriously titled opinion piece headlining on their website he says: "Immature timing for rate hike, despite fulfilling conditions". Most fund managers Spy has spoken to are furious with Janet Yellen for moving the goal posts repeatedly in her fear of adding a paltry 25 basis points the Fed's base rate. Janet is like the older sister who keeps on taking the baby brother's plaything away at the last minute. Immature indeed.
Spare a thought for tightly held private Singapore-registered investment management fund, Pangolin, that exclusively invests in South East Asia. Pangolin's NAV has dropped 10.91% in the last month alone. Fund manager, James Hay, who blames the fall largely on currency moves, writes in a public letter, "It’s all gloom and doom. Malaysian retail sales fell 12% in Q2. Indonesian motorcycle sales are down 21% YoY. There was that bomb in Bangkok. The haze from the burning of Indonesian forests is back. It really couldn’t be worse. In my opinion current valuations are extrapolating this pessimism. We continue to invest – even in Malaysia. Can anyone remember the last time you heard a commentator recommending a BUY on Emerging Markets? I can’t. That’s surely a good sign." Spy raises a glass of Mekong Whisky to Mr Hay and Pangolin and says that's the spirit.
Just as investors were fleeing emerging markets to the safety of developed markets and their 'well-run', 'well-governed' companies, Volkswagen gets caught cheating on their emissions data and sends a timely reminder that there is risk everywhere, sometimes just wearing smarter suits. Spy thinks this scandal will run and run. Spy's advice (wanted or not) take Tesla up on their test drive offer...
Spy's team of roving advertising spotters have found some new asset management campaigns in Hong Kong this week:
Aberdeen are pushing Japan Small Cap
Schroders are promoting China Equity and China Opportunities
And M&G is letting Hong Kong know they exist with a generic, Chinese language branding campaign.
In Singapore, Aberdeen has been spotted monkeying around with this brand push on the MRT.