The FSA Spy market buzz - 26 August 2016

By FSA Spy

Added 26th August 2016

Changes at UBS, Pioneer and Axa; Absurd passive claims; Eastspring’s AUM; Pictet goes MRF; Scary jargon; MPF success and much more.

The FSA Spy market buzz - 26 August 2016

Spy was sharing a cold bottle of Côte de Léchet Chablis with industry colleagues and considering the absurdity of the active/passive debate that seems to have raged all summer. It has culminated in a truly bizarre claim by the gloriously named Inigo Fraser-Jenkins of brokerage Sanford C. Bernstein that, effectively, passive investing is somehow “communist” and is calling for regulators to promote the active players for “social good”. Spy wonders whether Inigo has been having a few too many bottles of Chablis over the summer, too. Because of all the accusations one can possibly level at BlackRock iShares, Vanguard and State Street, the very last would be “Marxist”.

Spy hears of a big change at UBS WM in Hong Kong this week. Patrick Grossholz, the current head of investment management for the Swiss wealth management giant is moving back to the bank’s Switzerland office at the end of the month. Spy understands he will take on a global role, to be announced. Patrick is being replaced by Stefan Lecher, who is taking over the role. Sean Cochran remains in charge of the IPS Portfolio Specialists in Hong Kong and will continue to be responsible for looking at specific fund selection.

Further movement has emerged from Pioneer in Singapore, gathers Spy. Cherry Zhu, who was doing institutional sales, has stepped down from her role. This leaves Tay Soo How managing Southeast Asian institutional relationships, in conjunction with Jack Lin who overseas Pioneer in region. Dawn Foo, who was managing wholesale relationships, has also left the firm. There is no word yet as to who is replacing Dawn.

Axa’s ultra-high net worth life unit in Hong Kong has had a change, Spy overheard. David Varley, who had been managing regional sales, has apparently left the firm. Axa has had a number of changes recently. Glenn Williams, the former CEO of Axa Life in Singapore has stepped down and replaced by Doina Palici-Chehab, as reported by FSA’s sister publication, International Adviser.

Asset managers regularly tell Spy that building a large scale business in Asia is extremely challenging. Spy agrees – it is very hard with so many markets and so many different investment preferences. However, it appears that somebody forgot to send that memo to Eastspring, Prudential’s asset management arm. FSA recently reported on Eastspring's appointment of a new Singapore CEO, Phil Stockwell. Spy, who thoroughly enjoys reading press releases, looked over the appointment statement and found that total assets under management now exceed $140bn. That means that in just under a decade, Eastspring has added approximately $115bn in AUM. Eastspring is not a name that generates much street buzz, but Guy Strapp in the C-Suite is probably not stressing too much about that. 

Pictet is getting into the Mutual Recognition of Funds game, Spy has learned. Spy is not 100% sure which strategy is going to be domiciled in Hong Kong, but one is definitely on its way. Official announcement likely next week. FSA reported earlier this week that North-bound MRF sales have picked up with a record July.

The world of finance and asset management is in love with jargon and acronyms, thinks Spy. It makes it feel self-important and, crucially, mystifies clients, making the high fees appear justified. Newbies have to get used to terms such as ETF, ECB, BoE, BoJ, FOMC, DECS, EBITDA, CDO, MBS, etc, etc. Most of these are benign, but there is one that is giving bankers the Fear (yes, with a capital F). This is CRS or the Common Reporting Standard, which banks and other wealth managers need to apply to track assets and ensure the money has been declared to the appropriate tax authority. Along with many other countries, Singapore, Malaysia, Australia, Indonesia, China, Japan, Macau, Brunei and Hong Kong are adopting the rules from 1st of January 2017. The wealth management industry used to take a US Army style attitude to where the money came from: don’t ask, don’t tell. That is all changing, making wealth managers wonder where the assets are going to come from if closer scrutiny is on the cards. Taiwan, Thailand, Philippines and Bangladesh are currently not committed to adopting the standard. Will we suddenly see teams of bankers declaring that, after all, Dhaka is in fact a lovely place to spend a week…?

Spy is sometimes harsh on MPF funds, which seem to perennially deliver weak performance. So this week he studied the tables and was pleasantly surprised to see some stellar performance available to long-suffering MPF investors. If you are an aggressive investor, for example, you could have allocated to the Allianz Oriental Pacific fund, up 14.17% in the last six months or invested in PVC Fidelity Growth and got 14.08% in the same time period. Even Hang Seng’s Balanced Fund has delivered 12.88% over the last half year. In a low return world, those will do nicely, thank you.

Spy noted with amusement that Li Ka-shing’s Cheung Kong property group has put The Center (the HK home of Goldman Sachs, DBS and Morningstar) on the market for a record asking price of HK$35bn. Supposedly mainland Chinese buyers are flocking to bid. Caveat Emptor, warns Spy. Li Ka-shing has not made himself one of the world’s wealthiest people by buying high and selling low. No, for him, like Warren Buffet, it is the other way round. So when he sells, Spy thinks any buyer should take a very careful look at the price and wonder what there is left on the upside table.

Spy’s granny was a wily old coot who had seen a thing or two in her long life that began at the tail end of the 1800s. One of her many sayings was, “Judge people by their actions, not their words.” Sound advice when trying to work out what Janet Yellen’s Federal Reserve Open Market Committee is really thinking. Based on recent highly hawkish comments from members such as Robert Kaplan (Dallas) or Esther George (Kansas), one might think another rate rise is imminent. Certainly the idea made the market a tad more jittery of late. And yet in the most recent vote it was 8-1 to hold. Those votes tell the real story, whatever the rhetoric coming from the loudhailers. No rate rise any time soon, says Spy.

If you have a trip planned to Singapore in the next week, take a face mask. Spy’s Singapore colleagues are moaning something about the chronic Haze. Like an awful Avengers sequel, it is back with an irritating regularity but remains uncorrelated with markets and rate hikes.

Until next week…

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