Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

Across our active Global fund universe, Value managers have seen $41bn in outflows over the past 5-years, compared to $65bn of inflows in to Growth funds.With Value funds capturing some long awaited outperformance this year, we analyse the current holdings set up among the 63 active Value funds in our analysis.Overweights in EMEA persist against underweights in Asia and the Americas.  Financials, Materials and Industrials are the key overweights versus underweights in Information Technology.US Financials are the standout overweight, with <a href="https://www.smartkarma.com/entities/citigroup-inc" target="_blank" data-smartkarma-citation="entities:279:1" rel="noopener">Citigroup Inc (C US)</a> and <a href="https://www.smartkarma.com/entities/american-express-co" target="_blank" data-smartkarma-citation="entities:916:1" rel="noopener">American Express Co (AXP US)</a> the key positions.  The FAAMG group of stocks remain key underweight holdings, though <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> is the most widely held of the group. <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> is almost totally avoided and in Asia, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> , <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> and <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> screen as 'Unloved' by global active Value managers.

Across our active Global fund universe, Value managers have seen $41bn in outflows over the past 5-years, compared to $65bn of inflows in to Growth funds.With Value funds capturing some long awaited outperformance this year, we analyse the current holdings set up among the 63 active Value funds in our analysis.Overweights in EMEA persist against underweights in Asia and the Americas.  Financials, Materials and Industrials are the key overweights versus underweights in Information Technology.US Financials are the standout overweight, with Citigroup Inc (C US) and American Express Co (AXP US) the key positions.  The FAAMG group of stocks remain key underweight holdings, though Microsoft Corp (MSFT US) is the most widely held of the group. Tesla Motors (TSLA US) is almost totally avoided and in Asia, Meituan (3690 HK) , JD.com Inc (ADR) (JD US) and Pinduoduo (PDD US) screen as 'Unloved' by global active Value managers.

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*DOJ Going Overboard:The US Department of Justice (DOJ) has begun investigating Visa (V.US) [Visa] over anticompetitive practices again. This time for alleged restrictions of merchants from routing in-store and online debit-card transactions through less expensive card networks, which is in contravention to the 2010 Durbin Amendment; and*Here Is Where We Think The DOJ Is Wrong: With Visa’s termination of its upstart Plaid acquisition, Visa’s alleged attempt to monopolize the online debit business has already been thwarted. Further, the combination of mix shift toward covered transactions coupled with declining yields has acted as a headwind for Visa's debit interchange fees. That Mastercard (MA.US) has convinced numerous US banks to switch their debit-card portfolios away from Visa evidences competitive pricing pressures. Lastly, there may actually be precedence for Visa’s stance given the recent outcome of the Federal Trade Commission (FTC) v. Qualcomm (QCOM.US) case.

*DOJ Going Overboard:The US Department of Justice (DOJ) has begun investigating Visa (V.US) [Visa] over anticompetitive practices again. This time for alleged restrictions of merchants from routing in-store and online debit-card transactions through less expensive card networks, which is in contravention to the 2010 Durbin Amendment; and*Here Is Where We Think The DOJ Is Wrong: With Visa’s termination of its upstart Plaid acquisition, Visa’s alleged attempt to monopolize the online debit business has already been thwarted. Further, the combination of mix shift toward covered transactions coupled with declining yields has acted as a headwind for Visa's debit interchange fees. That Mastercard (MA.US) has convinced numerous US banks to switch their debit-card portfolios away from Visa evidences competitive pricing pressures. Lastly, there may actually be precedence for Visa’s stance given the recent outcome of the Federal Trade Commission (FTC) v. Qualcomm (QCOM.US) case.

Visa Inc – Noise Creates Buying Opportunity

*Gross Operating Revenues Do NOT Cover Recurring Costs At HSBCNA: HSBC Holdings plc’s (HSBC) [5.HK/HSBA.LN] US subsidiary, HSBC North America (US only) [HSBCNA], reported yet another troubling set of results for 4Q20, losing USD 152.6 mn – down USD 312.6 mn (195.4%) on a linked quarter basis. Excluding non-recurring items, core operating income declined USD 313.6 mn (230.1%) for a loss of USD 177.3 mn over the same period. As it stands again, HSBCNA’s operating costs exceed recurring revenues; *HSBCNA Is Evolving Into An Indian State Bank: Given the credit weakness, we find that NPL/TL and problem assets/TL ratios significantly worsened 92 bp and 160 bp linked quarter, respectively, to 2.82% and 5.01%. By our calculation, we note that net new problem loan growth is a scary USD 867.9 mn  - for an annualized rate of growth of 155.4% - in line with the Indian state banks. By our calculation, HSBCNA’s reserves are light by USD 3.8 bn or 17.6% of HSBCNA’s stated equity. We would have compared the reserve shortfall to PBT, but HSBCNA simply loses money on an operating basis; and*HSBCNA Should Be Dumped At Any Price: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. It cannot earn a positive return under its current structure; credit is again about to fall off a cliff; does not earning; NIMs are among the lowest in the USA; and capital is shortly about to fall below regulatory guidance. Further, the bad acquisitions and regulatory headaches should spur management to cut and run in the US. We look forward to Group results on February 23rd, and the clarity we will receive on its hot mess in the US.

*Gross Operating Revenues Do NOT Cover Recurring Costs At HSBCNA: HSBC Holdings plc’s (HSBC) [5.HK/HSBA.LN] US subsidiary, HSBC North America (US only) [HSBCNA], reported yet another troubling set of results for 4Q20, losing USD 152.6 mn – down USD 312.6 mn (195.4%) on a linked quarter basis. Excluding non-recurring items, core operating income declined USD 313.6 mn (230.1%) for a loss of USD 177.3 mn over the same period. As it stands again, HSBCNA’s operating costs exceed recurring revenues; *HSBCNA Is Evolving Into An Indian State Bank: Given the credit weakness, we find that NPL/TL and problem assets/TL ratios significantly worsened 92 bp and 160 bp linked quarter, respectively, to 2.82% and 5.01%. By our calculation, we note that net new problem loan growth is a scary USD 867.9 mn  - for an annualized rate of growth of 155.4% - in line with the Indian state banks. By our calculation, HSBCNA’s reserves are light by USD 3.8 bn or 17.6% of HSBCNA’s stated equity. We would have compared the reserve shortfall to PBT, but HSBCNA simply loses money on an operating basis; and*HSBCNA Should Be Dumped At Any Price: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. It cannot earn a positive return under its current structure; credit is again about to fall off a cliff; does not earning; NIMs are among the lowest in the USA; and capital is shortly about to fall below regulatory guidance. Further, the bad acquisitions and regulatory headaches should spur management to cut and run in the US. We look forward to Group results on February 23rd, and the clarity we will receive on its hot mess in the US.     

HSBC Holdings Plc –American Result Intimates Group Miss

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Bendigo And Adelaide Bank / Equity Bottom-Up

One of Australia’s smaller banks has just announced a surge in net profit, mostly due to lower credit costs. What may be more exciting is its far higher interim dividend, and guidance for the full year.

One of Australia’s smaller banks has just announced a surge in net profit, mostly due to lower credit costs. What may be more exciting is its far higher interim dividend, and guidance for the full year. 

Australian Banks – Profit And Dividends Surge

We have all seen how credit costs have come down for US banks. While the theme is relevant globally, the delta can vary dramatically. A closer look at banks with exposure to oil may give insights to how DBS will model its provisions during the final quarter of 2020.

We have all seen how credit costs have come down for US banks. While the theme is relevant globally, the delta can vary dramatically. A closer look at banks with exposure to oil may give insights to how DBS will model its provisions during the final quarter of 2020. 

United States

Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage, leasing, credit cards, and consumer finance.  The Company operates through physical stores, the Internet and other distribution channels across North America and elsewhere internationally.

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Wells Fargo & Co (WFC US)

Where Are Global Value Funds Positioned?

With Value funds capturing some long awaited outperformance this year, we analyse the current holdings set up among the active Global Value funds...

Steven Holden

Visa Inc – Noise Creates Buying Opportunity

VISA: The DOJ has again begun investigating Visa over anticompetitive practices due to alleged merchant restrictions to rout online debit-card...

Thomas J. Monaco

HSBC Holdings Plc –American Result Intimates Group Miss

HSBC HOLDINGS PLC: HSBCNA reported troubling results in 4Q20 - declining 195% linked quarter, as operating costs exceed recurring revenues. This...

Thomas J. Monaco

Australian Banks – Profit And Dividends Surge

BEN announced a surge in net profit, mostly due to lower credit costs. What may be more exciting is its far higher interim dividend, and guidance...

Daniel Tabbush

DBS – Modeling Provisions

We have all seen how credit costs have come down for US banks. DBS can see a significant decline in credit costs, with meaningful gas and energy...

Daniel Tabbush

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