Mountains in Clouds

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Hall Road Investments #52 (Family Office Sherpa, Index & ESG)

The Sherpa Update


SS&C – has made a knockout bid for local custody business Mainstream. As part of our DD for clients, we run into leading wealth platform BlackDiamond which is owned by SS&C. Up until now, they seemed to be half hearted with deployment into the Oz wealth market but maybe this acquisition will quicken the pace.


For those in the know, BlackDiamond is one of the more sophisticated RIA facing platforms and will potentially put the frighteners on local wealth tech that up until know have enjoyed the tyranny of distance and lack of local connectivity for global players


Wealth Management – I love data when it comes to the current state of wealth management as there is often no hiding for those in denial of change. EY released their 2021 research and some of the findings should be interesting reading for those keeping an eye on the global trends.


One that should be noted for local wealth managers - Asia-Pacific markets declare a high propensity

to move assets between advisers by 2024. The big winners from this move will most likely be investment related fintech services and independent financial advisers. They also expect an increase in Family Offices as the ultra-wealthy take advantage of technological change to bring the management in house.


HSBC – has opened up its IB infrastructure to Asia based Family Offices as they pivot back to the region and back to wealth. It also shows a move by some of the Private Banks (HSBC, Credit Suisse) to try to woo back family offices as lending revenue dries up and FUM/FUA/transaction fees become more important.


Fund Managers Performance – I receive a large number of fund manager updates, particularly their monthly performance numbers. Starting to see a lot of “since inception” quotes as they underperform and highlighting the monthly benchmark returns when they have a short-term bounce (at the moment, Value Managers). I’m not saying there is anything wrong with this, everyone wants to look good. But, for those looking to invest, performance numbers by themselves are rarely the most interesting part of selection.


Name Change – I thought this was a joke to begin with, Standard Life Aberdeen has changed its name to Abrdn (pronounced Aberdeen). Not sure what they’re going for, maybe I’m not the target demographic.


BTR – I met with Sentinel Real Estate which was very educational as I am at the lower branch of the knowledge tree when it comes to this asset class. They have some runs on the board in Perth and Melbourne so it will be interesting to see the take-up and how valuable Australian renters see the additional services and how much of premium they are willing to pay. As someone who rented for a long time, the thought of not having to deal with someone from the estate agent whenever I needed something repaired sounds attractive.


Qualis – I had an introductory call with this US third party asset manager platform, it was interesting as it seems to provide a marketplace for some direct investments into US alternative managers. We have seen managers localise their offering using platforms such as iPartners, this takes a different approach and allows for investment straight into the funds. They curate a list so it’s a bit like having an outsourced research function. Potentially a good fit for independent advisers that up until now could rely on a deep insto due diligence team.


Mutual Trust –CIO Graeme Bibby has left, according to his LinkedIn he finished up at the firm in March. MT press indicates that he left as part of a review of the wealth function with Jono Gourley taking the head role. This move seems to align investments more to sales and marketing as part of their growth strategy. Get ready for more in house product.


Distressed Debt – Qualis furnished me with this article from Bloomberg which was quite enlightening as it shows how few opportunities there are for asset managers that have gathered funds. I have concerns whenever a supplier gets “imaginative” with a strategy - we have met firms in this space recently and the need for due diligence is a priority.


Main Sequence – CSIRO deep tech fund raised another $250M via Tamasek and Hostplus. Interestingly, Morgan Stanley and Mutual Trust were also on the ticket – UHNW are definitely interested in this space and this offers a great track record and name.


AMP – Nader Naemi, the CIO of their Dynamic Market fund has left following the closure of the strategy. Nader was a client back in the day as he used ETFs for tactical bets - the recent ructions, fund outflow and underperformance of dynamic asset allocation seems to be the reason.


Meeting – Alceon, Qualis (US), Sentinel Real Estate, Magnolia Capital, O2Wealth, HSBC (HK), iPartners, SmartLeaf (US).


Indexing and ETFs


Capital Gains Tax – As the handwringing continues in the US over potential changes to the CGT rules, the one thing that seems to be gaining traction is the idea that this will cause increase flow into ETFs and Indexing strategies and away from active mutual funds. The reason? Low turnover portfolios and the application/redemption process that provides relief for unit holders when there is a redemption.

Here’s a great post from the SPDR ETF head of Research out of Boston that puts some numbers around the ETF vs Mutual Fund tax debate.


ESG & Philanthropy


Green Metals – in all the discussions with investors and fund managers on ESG, it usually centres on the decarbonisation of portfolios through the reduced exposure to oil and gas etc. One element that is generally not taken into consideration is the need for copper in the transition to greener energy.

Goldman Sachs put out this piece of research recently that I think deserves some attention. With green metals such as copper, the move from oil and gas will never happen and it seems there are structural issues with copper mining and the increased demand may cause more.


BTR – during my call with Sentinel it dawned on me that the Build to Rent may fit into ESG conscious portfolios given the choice between direct ownership and through the pooled vehicle. Environmental due to the green accreditation, Social for the 20% dedicated to affordable housing and Governance due to the improved corporate protection given to investors looking for rental exposure via the managed investment scheme.


Stranded Assets – seems that Gas is the new coal according to Bloomberg and they are expecting this transaction will be quicker because it doesn’t have the same tradition attached.

As always, if you want daily updates on what I’m looking at, start following the Hall Road LinkedIn page here.


Cheers,

Shaun

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