Welcome to our asset management marketing focus
This week’s round up brings you the rise of crypto hedge funds, MiFID II woes, a celebrity rogue trader’s latest outing, and the newfound validity of wacky ETFs.
Movers & Shakers
Is now ➜ Senior Sales Director, Asset Management Segment at BNP Paribas Securities Service
Was: Director, Global Custody & Agency Services at Bank of America Merrill Lynch
Is now ➜ Head of UK Sales at Legal & General Investment Management (LGIM)
Was: Head of Retail Distribution at Jupiter Asset Management
Kurtosys expresses their best wishes to all starting in their new positions.
Fund in Focus: Reality Shares Crypto Hedge Fund
Hedge funds on the up?
There’s been a whole bunch of worry regarding hedge funds for the past few years, and yet 2018 has seen a facelift for the traditional fund. Then again, it’s more like a complete surgical overhaul in the form of cryptocurrency-based hedge funds, this week following the news of a $100 million offering from San Diego based asset manager Reality Shares.
The burgeoning crypto hedge fund space is getting more and more suffocating, with managers clearly noticing a gap in the fence and filling it with some serious tech concrete. Coinbase, for instance, launched their Index Fund after a long wait from crypto admirers, surrounded by similar launches from other firms. The estimated number of these funds to launch this year alone is around 165.
This year, Reality Shares launched the first ever blockchain centric ETF in China, with the Reality Shares Nasdaq NextGen Economy ETF (BCLN) investing in global blockchain companies, and the Reality Shares Nasdaq NexGen Economy China ETF (BCNA) backing specifically Chinese-based blockchain companies. It also launched another ETF in January – the Reality Shares Nasdaq NexGen Economy ETF – which invests in global companies creating and implementing blockchain solutions.
Their new crypto hedge fund has obtained $25 million and plans to be multi-strategy; a so-called “mix of arbitrage, venture, and directional strategies”. Whilst cryptocurrency scepticism still pervades the industry, instead the focus on blockchain has increased dramatically. KPMG has already discovered that investment in the space so far this year has already surpassed that of 2017.
The convergence of blockchain and digital currencies is a bit of a double-edged sword therefore, but seemingly the fund launches in the space determine that the sceptics aren’t slowing any momentum.
Firm in Focus: Wealthify
Speaking of getting yourself in and amongst the offering of your contemporaries, Wealthify are now joining the ranks of Moola, PensionBee and Wealthsimple in offering a range of ethical investment portfolios.
Wealthify’s offering consists of five new portfolios, which will allow investors to invest in up to 25 funds from such firms as Kames Capital, Liontrust, UBS, Royal London, Vanguard, iShares and Legal & General. These providers are all signatories of the Principles of Responsible Investing, and leading advocates of the ESG movement. Any lapse, or continuous underwhelming performance for ESG from the companies would result in disqualification from the fund. The portfolios will invest in a mix of funds, from ETFs to mutual funds, across regions including emerging markets, Japan, Europe, the UK and the US.
Around three quarters of investors have been discovered by Boring Money to be interested in ESG investing, but these portfolios will cost a slightly higher fee than Wealthify’s usual 0.21%, instead costing between 0.42% and 0.69%. This is due to extensive research conducted by fund managers. Portfolios can be accessed from as little as £1 however.
Also, there is the ability to go down the cheaper end with the ‘caution portfolio’, with annual charges of 1.12%. These fees increase through the various portfolio options; cautious, tentative, confident, ambitious, and adventurous. ‘Adventurous’ will have total annual charges of 1.44% as the most expensive.
Chief investment officer at Wealthify, Michelle Pearce, says: ‘We want to democratise investing and give our customers the opportunity to invest in line with their principles. The fund providers we have chosen are best of breed in their relevant sectors of ethical investing.’
The ethical investment trend looks set to incline over the next 12 months, so expect to see many other wealth managers continuing to pervade this space in due course.
Regulatory Matters: Carry On MiFID II
An area of the MiFID II backlash we haven’t quite covered is the effect on research firms.
Of course, part of the directive (made effective in January) was for investment firms and asset managers to be transparent about charges for investment research. Whereas research could’ve been offered away for free as a marketing opportunity and luring investors in in the past, this is now prohibited.
But, as Financial Times has reported, boutique research companies have reported declining revenues this year, over 20% of those surveyed by Euro IRP – the trade body for European independent research providers. This is due to the fact that investment firms have completely slashed the prices that they pay for analyst research, to as little as $10,000 a year compared to the million-or-so from yesteryear. This is supposedly to attempt to “guard market share”.
This offers a further criticism of MiFID II, 7 months later, about the research pricing strategy clearly not being fair. Euro IRP is also persuading regulators to take “urgent action” regarding the issue, as boutique research providers “present zero risk of inducement” as they do not offer trading services. The FCA has already been active this month in the addressing of MiFID II, asking financial services firms to detail their pricing models and methodologies for buying research.
As expected, MiFID II continues to present problems in its correct (or otherwise) implementation, and still remains a talking point on the lips of all involved in the financial world.
Fintech News: Startup Specialists
Whilst not necessarily the start of the new year, far from it in fact, it’s never too late to release the most well-judged fintechs of 2018, in the Fintech50.
Using a range of industry heads from across the world as judges – who you can peruse here – a total of 1800 companies were brought down to only half a century. Many big names have made the list, including Monzo, Seedrs, Tink, Fenergo, but you can check out the whole gallery of company logos over at Fintech City.
Whatsmore, by filling in your email, you’ll be sent an early digital copy of the Fintech50 Yearbook before its full rollout in August. They’re the top of the fintech tree, so check ‘em out!
And still the speculation goes on…
This time, it’s Brexit, and its ongoing implications for asset management firms operating in the UK in any way. Whilst the UK’s government is hoping to ease the process of gaining permission to continue working in the country post-Brexit (funds can apply to the FCA for permission to continue operating for up to three years after March 2019), many firms are still feeling the heat and ready to jump ship.
As reported by Financial News, the fact that a no-deal Brexit is looking ever the more likely, contingency plans are starting to come into fruition if that does happen to be the case by March next year, the exaction date for the UK exit from the European Union.
There seems to be a discrepancy between asset managers as to what to do. Many will continue to act through existing legal structures in Europe’s nearby asset management hubs – Dublin and Luxembourg – both popular alternative destinations to Great Britain. BlackRock has so far kept any plans under wraps, where Jupiter has already signed a lease for a Luxembourg location and hired 5 operational managers to comply with EU regulations. Standard Life Aberdeen similarly looked to Ireland for life and pensions-related business, relocating workers to this individual distribution stronghold.
Many worldwide companies such as Amundi, who have only 180 London-based workers out of its 5,000 strong cohort of employees, are fairly nonchalant, not believing that this drastic possibility will cause too much of a shock to their operations.
Elsewhere, ESMA (the European Securities and Markets Authority) has warned firms to apply for a license to allow them to work in Europe ASAP for processing before the fateful date next year, and the FCA is pushing for EU authorities to allow temporary licenses into mainland Europe for London-based firms.
It’s all kicking off, and with the news changing from week-to-week, it’s keeping all asset managers, regulators and other financial players on their shaky toes.
‘“Thematic ETFs have gone from laughing stock to big business,” said Eric Balchunas, a senior analyst at Bloomberg Intelligence. “This has attracted the big fish who smell a chance to make a buck.”’
An insert from this insightful article from WealthManagement.com which sums up the rise of the rogue ‘thematic ETFs’ which have caused stirs and laughs amongst the investment industry in equal measure.
We’ve heard about all sorts when it comes to ETFs: marijuana, beer, Quincy Jones etc., and it’s the crazy, crazy ‘underworld’ of the exchange-traded fund circuit which has been quietly building momentum (and money) in the darkness.
And now, the high return/’handsome’ fee scenario that has become commonplace amongst thematic ETFs has enticed the world’s largest asset managers looking for a piece of the pie, as Eric Balchunas notes above. BlackRock’s iShares Robotics and Artificial Intelligence ETF launched in June charges pretty cheap fees compared to the norm, but other news includes State Street’s foray into ‘deep space’ and ‘deep sea’ exploration, as well as Goldman Sachs’ launching of 5 new ETFs hinging on a ‘data-driven world’.
Thematic ETFs: the court jester now hired by the most noble of monarchs.
You can’t be much more ecstatic than that.
Chicago Booth Review – the outlet for all things behaviour finance related – has recently released its Summer 2018 issue, which mainly takes a look at data’s effect on the global economy.
That being said, it has also included its most interesting data visualisations here, including an animated timeline of how the balance of wealth has shifted in the past thousand years, the further diversification of portfolios since 1979, and how certain factors introduced since 1994 (which was, I may add, a great year) proved significant as explanations for stock returns.
For data lovers, it’s a playground.
…following our latest looks into the ongoing investment interest in Tesla’s current situation, I’m sure many of you will be aware about the latest news.
Elon Musk caused a bit of a backlash from the SEC after mentioning his desire to take Tesla private after securing funding – something which was being looked into, as if it turned out to be false, a regulatory Thor’s Mjolnir hammer would be imminent.
However, Musk has now confirmed that Tesla’s funding from Saudi Arabia’s sovereign wealth fund has been in the works for around two years. Who knew? It’s never an easy journey with Elon, but you can read his full statement and validation here at TechCrunch.
For anyone in the trading world, I’m sure the name Nick Leeson is fairly ubiquitous – the rogue trader known for carrying out £800 million worth of fraudulent trades in 1995. Well now, he’s going into the latest ‘Celebrity’ Big Brother house with a randomly Z-list generated bunch, including a TV psychic, some people from Love Island, and an ex-footballer. Now an after dinner speaker, there’s no end to where the financial services’ famous and infamous faces can appear.
That’s all for this week, but be sure to check back soon for more asset management marketing highlights and fintech snippets from Kurtosys.