Funds Hub

Money managers under the microscope

All Aboard the Good Ship QEII

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QE II ship smallWhere will the fickle finger of the Fed point next? It’s a dilemma taxing asset managers trying to anticipate where the Federal Reserve will be spending its pennies once it starts its second round of quantitative easing. The Bank of Japan recently hinted that it might buy commercial paper, exchange traded funds and real estate investment trusts as part of its asset purchase scheme, so the Fed may not stick to T-bills and mortage backed-securities.

“Investors will need to look out for signals from central banks,” said Andrew Milligan, head of global strategy at Standard Life Investments, speaking at a briefing in London today.  Milligan describes QE as “crossing the Rubicon” and pointed out that US government bond yields are grinding lower because hedge funds have jumped in to the T-bill market on the expectation that the Fed will start a second round of bond buying. If the yield for the 10-year T-bill dips below 2 percent, Milligan said, this would be getting close to bubble territory.

“That will continue until November and then we may see some profit-taking,” said Milligan. “There’s a lot of front-running going on.” Some of the upper estimates see the Fed expanding QE towards $3.2 trillion, which could lead to some frothy markets in equities and commodities as investors pursue the “risk on” trade.

For its part, Standard Life Investments is now broadly neutral on government bonds, having been heavily overweight six months ago. “As yields came down over the summer we have sold out in some portfolios,” said Richard Batty, global investment strategist at SLI. Instead, SLI is heavily overweight corporate bonds, and has been adding to high yield bonds as companies become more profitable.

Shocking.. Toxic.. Nasties.. Devastating.. Leeches..

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.. Some select phrases from this morning’s Daily Mail pop at greedy fund managers who rake in fees whether or not they’re beating the market. It might read a bit like an advertiorial for passive managers like Vanguard (which gets an unusually high number of prominent name checks) but it won’t be comfortable reading for other asset management execs.

The paper’s salvo gives a kicking to firms like Axa and Henderson and makes much of the secretive pay packages earned by the fundies and the marketeers. It also, somewhat bizarrely reckons the grey-suited long-only managers looking after your ISA are responsible for most of the yachts bobbing gently in the Marina at Monte Carlo.

The chart that bounced…

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Our graphics team have been busy producing some wonderful interactive contraptions and this is one of the best I’ve seen, a clear and useful look at the top equity fund sectors over the last three years.

No great surprise to see Thailand ruling the roost but interesting to see Italian funds faring so poorly, and who would have picked Israeli small cap managers to make the top 10?.

Socially useful?

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Andrew Baker, boss of hedge fund industry lobbyists AIMA, has taken umbrage at the “unsavoury terms” used to refer to his members.

He doesn’t like the biblical monikers of locusts or parasites and gets very prickly indeed at accusations the Mayfair money men might be socially useless.

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