Rumours at First State, AGI hires, CSAM gets fixed, GIC gets real, Schroders at a record, AIA winning in China, Morningstar questions, OCBC woes, and much more.
Spy found himself in Macau this week among the hollowed-out casinos and dreary looking shopping arcades selling overpriced Rolexes and dusty SLRs to the few happy punters whose wallets were thicker on leaving than arriving. Spy was accompanying a French equities fund manager on a recce of his gaming investments, a “first hand look at the real colour on the ground” he assured me, while comfortably losing HK$1,000 at roulette in a single spin. Even if Macau is deathly quiet, it seems everyone is gambling these days – the Brits with Brexit, the Republicans with The Donald, luxury fashion brands with HK Central rents, Asian private bank clients with local high yield bonds. Spy is not too sure who the winners will be…but remembers the house usually wins in the end.
A cacophony of rumours is reaching Spy that First State Investments is going to lose Christy Goh as director of their intermediary business in Singapore. Christy has been with the firm for about a decade and is a well-known figure in Singapore private bank circles. First State was keeping mum when FSA enquired, but the street chatter is about where she is off to rather than if she is going. Watch this space.
Spy hears that Pimco has beefed up its marketing department with the hiring of Wendy Loke, who reports to head of APAC marketing Melissa Reeves in Hong Kong. Wendy was formally at Blackrock in Singapore and had the role of the managing director and head of marketing for Southeast Asia. Pimco has had a torrid few years, losing 25% of its total AUM. But there are encouraging signs of stabilisation. It was recently announced that Pimco hired Man Group’s CEO, Manny Roman, as its new chief.
In another shuffle of the deck in intermediary sales support, Spy understands that Allianz Global Investors has pinched Kelvin Lam from Schroders to beef up their local sales effort. Allianz seems to be having a later summer push: Dozens of taxis promoting its brand have been spotted in the Lion City. Spy reckons Kelvin will have something to talk about: AGI’s Global Metals and Mining Fund is up 32% year to date. Impressive as that is, it is below the benchmark which is up an astonishing 41% year to date. Tough school!
If you have not heard much about “fixed maturity”, you are going to soon, reckons Spy. Credit Suisse AM has rather stunned the market with its fixed maturity bond fund, raising a staggering $3.3bn since April. Spy understands every asset manager on the street is rushing around trying to replicate that success and they probably wish that they had locked in their yields pre-Brexit, like CS. While the CSAM initial product was launched with global credit, Spy understands a new version is coming based on Asian credit. Third party managers, getting on that CS shelf just got harder…
Spy reckons most Hong Kong MPF investors, where returns have been mostly awful, are looking longingly at the guaranteed yields provided by Singapore’s CPF. With some Singapore retirement savers getting a return provided by CPF in excess of 5% risk free, Spy is wondering how the CPF will actually make those returns. State-run GIC, one of the custodians and investors of CPF monies (indirectly through Special Singapore Government Securities), has told the market this week it is expecting returns of 2% or less in the decade ahead. If anybody thinks even triple-A rated governments can easily solve the retirement conundrum, in an age of longevity, they are probably living in la-la-land.
Schroders, despite some adverse headlines, notes Spy, has hit record assets under management of £343.8bn. The British blue-chip manager experienced outflows of £2bn last quarter, and as Spy suspected, blamed this partially on Brexit-inspired volatility. Of most interest to Spy, however, was CEO Peter Harrison’s comment to the FT, “Brexit is a small issue, but it is not the issue. I see a lot of opportunities around the world that we will invest in. Asia has low saving rates and low penetration of mutual funds — investing there seems very sensible.” Very sensible indeed, reckons Spy.
Watch the money says Spy. If AIA’s results are anything to go by, money is continuing to exit China at a record pace. As reported by FSA’s sister publication, International Adviser, AIA has reported 60% growth in its value of new business from the mainland. Governments around the world are always encouraging citizens to get more insurance. Spy wonders whether that advice and enthusiasm extends to the offshore world or propping up local asset bases?
Spy has often wondered whether fund ratings matter? What does a gold star or a five star designation really mean? What is the use of holding a 5-star rated fund that goes nowhere or incurs losses? Or indeed why shun a 2-star fund which blows the lights out? Spy was left scratching his head this week. Morningstar provides star ratings not only to funds but to equities, it seems. Morningstar gives Facebook, the ubiquitous social platform, a measly 3-star rating. The stock is up nearly 500% in three years. What does a stock need to do to get a 5-star rating, one wonders? Give your shoes a polish too?
If you don’t exist on the internet, does that mean you cease to exist, postulates Spy? The team at Invesco in Singapore must be a tad concerned they have slipped into the matrix. On Invesco’s website, within Asia-Pacific, Australia, China, Hong Kong, Japan and Taiwan are all listed as available regions but Singapore is sadly absent. Jalil Rasheed and Noelle Lim better pinch themselves to see whether they are still there or send a message to IT and marketing quick.
Pity OCBC, which uses multiple sources and methods (including Mercer fund reports as a reference) to build their conviction list. Of the 78 funds listed that are on their high conviction list (out of 2000), fully 57 or 73% of them are in negative territory on a one-year basis, just when global equity markets are hitting record highs. The worst performing on their list is the Deutsche China Equity Fund down 29% while the best is Blackrock’s World Gold Fund, up 15%. The second best performer is J.P. Morgan Asset Management’s Japan Equity up 9%.
For the gold-buying, bunker-retreating, end-of-the-world-believing, fringe-lunatics, some fuel to their paranoid fires. In 1971 combined US public and private debt was $1.6trn and has now increased forty fold to $64trn while nominal GDP has *only* increased by 16 times, according to David Stockman’s Contra Corner. So when Janet Yellen keeps rates on hold, don’t be too shocked. Even the tiniest move in rates has gargantuan implications for debt repayments. No surprise, even with rocketing equity markets and a tightening job market, she remained accommodating this week. Spy says: no Fed increase this year or beers on him.
Fidelity is coming over all warm and cuddly and wanting us to all to get together. Hong Kong and Singapore are being given bright colours and happy faces in their newest, feel good campaign. Spy's photographers snapped this outside HSBC main building in HK:
Until next week...