Monday, August 20, 2018

The Future For Equity Funds

No Annual Fee Fund By Fidelity

The biggest news to come out for a long time for equity funds has to be the announcement By Fidelity Investments that they were introducing two index funds without annual expense charges on August 1st. The ramifications were quite apparent as stock prices for Franklin Resources and Legg Mason eased significantly.

The last 15 years have seen the rise and rise of indexed funds, pioneered by Bogle's Vanguard. The future for active fund management seems to be reminiscent of Jebediah and his horseshoes cobbling business.

The no annual fee index fund by Fidelity reeks of someone scheming to pull them all in and upselling other products to them. The premise was further justified by its policy to only offer the no-fee fund to retail investors and not funds or institutions.

The trend of indexing does not look to be stopping anytime soon. In 2010, Vanguard surpassed Fidelity as the largest manager of mutual fund assets. It had in 2010 $5 trillion compared to Fidelity's $2.5 trillion. The rise of indexing was not only growing, the net effect of investors pulling out of actively managed funds compounded the effect. In 2017 alone, investors pulled $55b from Fidelity's actively managed funds.

The Indexing Trend

The trend of opting out of actively managed funds is worth examining. It is not based on the performance of the fund alone, surprisingly. Danoff, who took over Fidelity's $131b Contrafund in 1990, has seen steady redemptions by investors over the past few years despite his record of BEATING the S&P by an average of 3 percentage points A YEAR.

How is indexing affecting the rest of the fund management market? Well, hedge funds are finding it near impossible to raise funds unless they are proven and has the consistency of returns above 15% a year for at least 3-5 years. Even the 2-20 rule is almost obsolete: 2% annual management fees and 20% shares of profits.

The Lure Of Risk Aversion

Are market forces mushrooming to divert most of investing funds into indexing? Isn't that a bit average? Or is it that the risks of poor performance by pension funds outweighing the benefits of outperformance - is that driven by miss the targets, you are fired mentality... doesn't that reward mediocrity? 

The Depletion Of Alpha Returns

Or has retail investor given up on chasing the alpha returns? Or the era of personality-driven investing over???... thanks to the glut of quant trading which theoretically captures the alpha much faster. There is only so much alpha returns in the marketplace. The rise of quant trading has to deplete the alpha returns for active funds.

Studies since the late 80s and 90s have always confirmed that 80%-85% of active funds generally underperform their benchmarks. Maybe that truth has finally taken hold. It does take time for people to react to verifiable truths. I mean the banks and fund also have a lot of marketing dollars to keep the facade on that active fund management is still viable. Well, 20 extra years is long enough before investors say "hey, you're fucking us up royally".

What is the benchmark now? Vanguard should be the golden mean that everything else gravitates to. Investors in Vanguard funds pay only 0.11%-0.14% a year and they get the best of indexed returns without any stress. The rest of the industry (active and indexed) has an average annual fee of 0.62%. You can easily surmise that the 0.62% has the other indexed funds around 0.2% and the other actively managed funds at around 1%. You can almost picture the next few years how this scenario will play out, with Vanguard winning of course. (Blackrock did come out with the lowest fee of just 0.03% for an equity ETF in 2015 but that was an outlier).

Dangers of Indexing

Index funds on its own are fine. The trouble is that plenty of indexed funds are available via ETFs. If every investor in indexed funds stays invested day in day out, there will be no issue. The reality is that while many are ok with indexed investing, they also practice timing the market for indexed funds.. i.e. pull out funds from ETFs when there is calamity in the markets. When they do that in substantial amounts, this will exacerbate any market weakness as the funds will be forced to continue to dump indexed stocks in the respective ETFs.

The sad thing is that it could result in a vicious cycle which could trigger panic selling over days.

The Age Of Normalised Returns

The world will have to be content and contend with very average returns. We are talking of 3%-6% a year over the longest time. This scenario will be further emphasized the larger the pool of funds that are in indexed funds. Presently some 45% of US equity funds are passively managed and should surpass the 50% mark within two to three years. Imagine the figure at 60% eventually... whats the point of having CNBC, whats the point of reading FT or WSJ, whats the point of listening to quarterly results briefing, whats the point of equity research ...

The Last Bastion ...

That is why I keep telling people who want to invest on their own, that the only justification is to directly invest in SMALL CAPS only. Indexing will take care of the mid to large caps. 99.99% of indexed ETFs cannot touch small caps due to lack of liquidity. Only in small caps can alpha be discovered, its the last untouched bastion.

You can also surmise that the only actively managed funds that will succeed are those small caps funds (only thing now is to drop the bloody annual fees from 1.5% to 0.5%).

Saturday, August 18, 2018

R.I.P. Aretha ..

Aretha Franklin, what a singer, what a live performer, what a trail blazer ... just to mention songs such as Respect, Natural Woman, Think ... these were great songs that empowers. Instead of listening to her hits, I think listening to Rumer's fantastic tribute to her would be better.

I got Aretha in the morning
High on my headphones and walking to school
I got the blues in springtime 'cause I know that I'll never have the right shoes
Momma she'd notice but she's always crying
I got no one to confide in, Aretha nobody but you
Momma she'd notice but she's always fighting
Something in her mind and it sounds like breaking glass
I tell Aretha in the morning
High on my headphones and walking to school
I got the blues in springtime 'causee I know that I'll never have the right shoes
You got the words, baby you got the words 
You got the words, baby you got the words 
Aretha, I don't want to go to school
'Cause they just don't understand me and I think the place is cruel
Child singer, raise your voice
Stand up on your own, go out there and strike out
I tell Aretha in the morning
High on my headphones and walking to school
I got the blues in springtime 'cause I know that I'll never have the right shoes
But I got the words

Songwriters: Sarah Joyce / Steve Brown

Friday, August 17, 2018

Watch Big Brother

This was a Donnie Yen movie, produced by him and apparently a labor of love. He wanted to do this movie for the longest time. Much in the line of Little Big Master (Miriam Yeung), a movie dealing with the shortcomings of education.

This kind of premise can easily dissolve into cliched plots and easy solutions. However, the movie did manage to rise above that a little. Besides the tackling of real issues, Donnie did not disappoint his fight fans. There were some remarkable fight scenes, in particular, the one where he took on some MMA guys. It was ballistic and balletic at the same time.

Good movie. Go watch.

Thursday, August 16, 2018

Malaysia's Gastronomy

OK, curry laksa made the #2 spot. While all Malaysians are happy to get the silver medal out of all the food experiences in the world... sort of like the Olympics of gastronomy, I think I can speak for everyone that "hey, there are other dishes from Malaysia that would have beaten the shit out of curry laksa".

The book is bound to be a bestseller with a number of notable and well-traveled chefs coupled with votes by the many Lonely Planet staffers around the globe, thus lending more credence to the compilation.

You cannot do such a compilation without it being argued and debated vigorously. Taste is so subjective but I do believe there is a distinctive tastiness curve globally. As more and more people travel, the world gets a lot smaller, in a good way.

I have often shied away from proclaiming Malaysian food is de best when I young. However the more I travel, the more I find that many local dishes are pretty excellent. Maybe its the amalgamation of a few distinctive, yet meshable cultures, a fusion pot that does not bring fusion to be a bad or distilled word that we associate with most of the time. 

In the book of 500... Malaysia had 11 entries. That's slightly more than 2%. There are 195 countries in the world. By right each country should only have 2.56 of entries in the book. Even if we whittle the number of comparative countries to 100, it should be just 5 entries per country. So we are punching way above our weight (pardon the pun).

Have a look at the other local entries. Again, all Malaysians would have a gala time debating the correct order. What was even more alarming to us was the OMMISSIONS from list. One thing for sure, the Singaporeans will be claiming that half the dishes belong to them, go fly wau la.

1. Ikan bakar (No. 60)
2. Assam laksa (No. 123)
3. Beef rendang (No. 268)
4. Wantan mee (No. 299)
5. Kaya toast (No. 352)
6. Roti canai (No. 404)
7. Char kway teow (No. 432)
8. Durian (No. 445)

9. Hokkien mee (No. 464)
10. Bak kut teh (No. 468)

Looking at the top 20 list, it was obvious that Lonely Planet wanted to be inclusive so as to offend fewer people and sell more books. Each of the 20 entries was from a different country.

Its close to an abomination that the following dishes did not make the list:
nasi lemak
apom balik
sarawak laksa
prawn mee

All said, we can tell tourists that if you came for the 11 dishes, we have probably another 11 (and more) which are even better.


1 Pintxos in San Sebastián
2 Curry laksa in Kuala Lumpur
3 Sushi in Tokyo
4 Beef brisket in Texas
5 Som tum in Bangkok
6 Smørrebrød in Copenhagen
7 Crayfish in Kaikoura
8 Bibimbap in Seoul
9 Pizza margherita in Naples
10 Dim sum in Hong Kong 
11 Ceviche in Lima
12 Pastéis de nata in Lisbon
13 Oysters in Tasmania
14 Cheese in France
15 Jerk chicken in Jamaica
16 Lamb tagine in Marrakech
17 Chilli crab in Singapore
18 Moules frites in Brussels
19 Peking duck in Beijing
20 Pho along the Hau River in Vietnam 

Wednesday, August 15, 2018

The Ultimate Guide To Ipoh Ngah Choi Kai

I cringe every time someone said that they had the best ngah choi kai in Ipoh at Lou Wong. Ask anyone from Ipoh and nine out of ten would never eat at Lou Wong. I guess if you are out station folks, you may need more guidance in locating the real deal.

We Ipoh folks take the dish seriously. After all, you buy any tofu or bean sprouts from Ipoh markets, they are already very good. How not to have good hor fun when you live in Ipoh?

Oh, please do not ever, ever mistake kaiseehorfun with ngachoykai. The former is made with prawn head stock, has chicken slices and gauchoy. 

The Best Of The Lot ....
So, what makes the dish stand out from being average to being brilliant. Well, at least they must have the best hor fun and bean sprouts to start with, not difficult. Then its the soup base, here is where quality comes in, how much "stuff you put in and how long you boil it for". We always can taste some "MSG" at Lou Wong although they will always deny it.

Then its the chicken, it is not whether they look golden yellow (that is a cheap trick of bringing out a nice colour). The test is how smooth and easy they detach from the bone. Test: can you pop a chicken wing into your mouth and easily spit out the entire bone, seriously.

The final test is the soy sauce/cooked oil mixture, it has to be just right, not too salty and has that special something (which I think is fried chicken fat).

The locations of the 5 outlets are on the linked map, thanks to a reader:

There are 5 places you would know (or should know):

Soup base: 7/10
Chicken: 8/10
Soya/oil Mix: 7/10

Soup base: 7/10
Chicken: 7/10
Soya/oil Mix: 7/10

Soup base: 8/10
Chicken: 9/10
Soya/oil Mix: 7/10
+ a tip here, they also serve probably the best stewed chicken feet, even better than Cowan Street outlet

KAM HOR (Ipoh Garden)
Soup base: 8/10
Chicken: 8/10
Soya/oil Mix: 8/10

COWAN STREET (#44 Cowan Street, random opening hours, priciest)
Soup base: 9/10
Chicken: 10/10
Soya/oil Mix: 10/10

There you have it, the ultimate guide. If you look at the scoring, you would know why we cringe when you say Lou Wong is sooo good.

Restaurant <span class=

p/s: photos stolen from various food bloggers, who always want to lynch me ...

Sunday, August 12, 2018

Can We Have Updates On Turkish Investments Please

Turkey is resembling Thailand back in 1998, only much worse. Have a look at the Turkey lira against USD. I took a 5-year chart because Malaysia has invested in a few big assets there.

 Khazanah has some exposure there, and wanted to sell their holdings back in February 2018. What's the update? Did Khazanah hedge their investments? How did the demise of the Turkish lira affect the investments over the past 5 years?

Avicennia, the insurance holding unit of Kuala Lumpur-based Khazanah, bought 90 percent of Acibadem Sigorta for $252 million in 2013 from founder Mehmet Ali Aydinlar and Abraaj Capital Ltd. It bought the remainder after the company stopped trading its shares on Borsa Istanbul.
In 2012, the sovereign wealth fund’s IHH Healthcare Bhd. arm bought 75 percent of Acibadem Saglik Yatirimlari Holding AS, which was also founded by Aydinlar. The deal for Acibadem Saglik, then Turkey’s largest hospital chain, valued the business at $1.68 billion.
Next, MAHB:

Bloomberg  on Friday reported that Turkish Airlines was bidding to buy an 80% stake in Istanbul Sabiha Gokcen International Airport (ISGA) in Turkey, which is wholly-owned by MAHB. The report, citing people with knowledge of the matter, said Turkish Airlines offered 750 million euros for the stake.
Malaysia Airports was part of a consortium that won a 1.9 billion euro contract to operate the airport in 2007. In 2013, it agreed to raise its holding in ISG to 60% by acquiring a 40% stake held by Indian partner GMR Infrastructure Ltd for 225 million euros.It bought the remaining 40% from Turkey’s Limak Holding in 2014 for 285 million euros.

What was the holding cost? What were the losses or profits suffered thus far? Were there any efforts to hedge the position over the past 5 years? How did the demise of the Turkish lira affect the investments over the past 5 years?

Friday, August 10, 2018

Best Cheesecake Ever - Jaslyn Cakes

Not a sweets person really but I think I just tasted (or devoured more like it) the best cheesecake ever in my life... baked or otherwise ... ever!

You know how something is so good that you had to share it to everybody you know immediately. This is it. 

Plus I have had lots of cheesecakes... very good ones in Sydney, Melbourne, NYC, HK ... 

After posting it on FB, friends commented about other stuff that Jaslyn has that are to die for:

Butter cake

The funny thing is I have yet to visit the shop even though its in Telawi. Friends tell me it has opened for over 4 years now, ... I told you I am not a sweets person! Lol.

7A, Jalan Telawi 2,
Bangsar Baru,
59100 Kuala Lumpur
03-2202 2868
Jaslyn Cakes
Opening hours:
Monday: Closed
Tuesday - Friday: 1100 - 1900
Saturday -Sunday: 1100 - 2000

Thursday, August 09, 2018

EPF - Stay The Course

Do not break the mould or change the wheel if it is not broken. EPF must stay the course and not try to fix what is not broken.

As expected but pleasant news nonetheless, was EPF's 6.9% declared dividend for 2016. All the more so in the present correction phase for global equities. 

The Comparison With UK & European Pension Funds

In the UK, the average fund ended 2016 up 15.7 per cent. The last time pension funds returned more than 15 per cent was in 2009, when recovery from the 2008 crash saw average growth of 22 per cent.  It represented a 13 percentage point increase on pension fund returns of 2.6 per cent in 2015 and the fifth consecutive year of pension growth, after the 4.6 per cent loss in 2011.

Comparison with UK pension funds is not really fair or comparable as their fund allocation usually are more aggressive, and they may also lack access to local government bonds inherent "structure and returns, and maybe safety". But I brought this up to show how volatile the returns can be, in the case for UK pension funds. 

The same can be said for the European pension funds. I'd rather see my country's pension fund making around 5% a year, year in year out, than to see volatility. We need our pension funds to be dependable, not flamboyant.

Look at the returns for EPF below, in particular for 2008/2009 or even 1998/1999. During the former period, we had the subprime financial meltdown. In the latter period, a more relevant Asian financial crisis prevailed, but EPF maintained decent dividends. EPF deserved a lot more credit than what they get from Malaysians in general. It is so difficult to maintain a return of around 5% a year for over 20 years. A lot of it has to do with their objectives, and the structure that they have laid out and the way they executed decisions. Their independence MUST and SHOULD never be compromised (read between the lines). 

As the size of fund grows, over the last 3 years in particular and onwards - it has gotten more difficult to maintain similar dividends as basically, you are running out of ringgit assets to invests in. Hence their decisions to invest more overseas and even in regional/global private equity are necessary. 

On that note, it is imperative that "sustainable, proven, stable, sizable" assets such as PLUS should never leave the stable of EPF. Even if the price offered is tremendously attractive, say at a forward PER of 40x, because such a high price will and can only come back to haunt us via higher toll rates.

Kadar Dividen
          Peratus             (Simpanan Shariah)
        Peratus            (Simpanan Konvensional)
1997 - 1998
1988 - 1994
1983 - 1987
1980 - 1982
1976 - 1978
1974 - 1975
1972 - 1973
1968 - 1970
1965 - 1967
1960 - 1962
1952 - 1959

For a better case study, just go and research and compare the similar HK Fund or the much maligned but steady CPF. Below is the volatile HKMPF returns. We don't such volatility for a pension fund.

Tuesday, August 07, 2018

Dynastic Powers In Asian Politics

I guess the headline is pretty clear as to what I am on about. Sure, it happens in other jurisdictions as well, even in developed countries with a heightened sense of democracy. However, it is surely more palpable in Asia. The pictorial by Nikkei Review hits the nail on the proverbial head.

Many people argue that political dynasties affect the legitimacy of democracy and the quality of government policies as dynastic politicians have incentives to implement policies that will increase their advantage and guarantee the perpetuation of power.  Naturally, it is dangerous to generalize as I am sure every dynastic successor will consider theirs as an exception to the rule. That they are deserving to be there.

IF the said country is riddled with weak regulatory institutions, IF the said country has a weak definition of the three independent pillars of governance - the executive, legislative and judicial - then what follows will most likely be patronage, corruption and outsized efforts (sometimes illegal and unfair) to stay in power.

Outsized efforts to stay in power (sometimes illegal and unfair) stems largely from the belief that they do not deserve to be there.

But why is this more prevalent in Asia? Stronger familial values? Is our mindset more tuned to the pervasive influence and privilege attached to 'successful families'?

This is not to say all political family dynasties are inherently poor choices. We have to be careful that new appointees are deserving and elected in a democratic environment. Politics is a tough game. What we have to avoid is political families needing to keep political power going because they have done too many "things that cannot be brought to light". Keeping it in the family or extended family is a sure way to keep the garbage in the bin. Or as they say, they cannot afford to be not re-elected.

Sunday, August 05, 2018

Why Kamikaze Pilots Wear Helmets???

This was a great read. Its an economist who tries to be funny by answering interesting daily life questions and wonderings. The author is Robert Frank, the Professor of Management and Professor of Economics at Cornell University's School of Management. Just look at the questions he tries to answer and you know its a good read already:
  • Why does a US$500 tuxedo rent for US$90 a day while a US$20,000 car rents for only US$40?
  • Why do female models earn so much more than male models?
  • Why might retailers deliberately hammer dents into their own appliances?
  • Why do the keypad buttons of drive-up cash machines have Braille dots?
  • Why are child safety seats required in cars but not in airplanes?
  • Why are whales, but not chickens, in danger of extinction?
  • Why is there a light in your refrigerator but not in your freezer?
  • Why do 24-hour convenience stores have locks on their doors?
  • Why are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for?
  • Why are brown eggs more expensive than white ones, even though the two types taste the same and have identical nutritional value?
My favourite chapter is in relationships where he tries to answer: why it is easier to find a partner when you already have one; and why are there so many dumb blonde jokes when research shows that attractive people are generally more intelligent than others, hence blondes should be considered as more intelligent as they are generally perceived to be more attractive. My other favourite topic was: Why did Kamikaze pilots wear helmets????

The Economic Naturalist
(Why Economics Explains Almost Everything) by Robert H Frank
Virgin Books Publications (UK)

Basic Books (USA) 2007 / 2008

Tuesday, July 31, 2018

All Time Fav Albums

Since I have nothing bullish or non-depressing to post, I shall post about my all time fav albums. When we were younger, the list would change every few months, but the list kinda stop when you turn 35. See if you

have similar taste in music, or else you can post your fav in the comments section and reasons why. A better headline would be the top albums that I would take with me if I was LOST on an island with a CD player.
While redoing the list, I found that I could not keep it to ten, it had to be twelve, hence Countdown from number twelve:

Tanto Tempo by Bebel Gilberto - Daughter of the brilliant Joao Gilberto. This is Brazilian music jazzed up and highly seductive and hypnotic. Best album from Latin America for the last 10 years, if not longer.

11) Tapestry by Carole King - If I did not have balls, this would have easily rated higher. So many songs from this album became timeless classics, such as You've Got A Friend and Will You Still Love Me Tomorrow. Its a great snapshot of a singer-songwriter right at the very peak of musical genius.

The Grand Illusion by The Styx - Loud, commercial but melodic band with loud hairstyles. Their best album by far. Every song has its own merits and weaved into a proper album. Derided by many but this album can stand the test of time. Check out The 70s Show parody of The Styx.

December by George Winston - Takes a lot to listen to one fella playing one piano with no additional instrumentation. Feeling wistful, philosophical, or just a quiet night to reflect. His notes lift you up and touches your soul literally. The title track, though instrumental may make your tears well up. Really.

Winelight by Grover Washington Jr & Bill Withers - Best romantic jazz ever. Enough said.

Silk Degrees by Boz Scaggs - This man has a weakish voice but his songs were brilliant. Again, this album captures him at his musical genius peak. Songs like We Are All Alone, Harbour Lights and my favourite Love Look What You've Done To Me. Highly under-rated.

Bat Out of Hell by Meatloaf - Another album that needed to be heard in its entirety. May be too melodic and commercial to rock fans but its the anthem 70s album for good reasons. Songs like Heaven Can Wait, Two out of Three Ain't Bad and the title track - how not to be a top favourite.

Night At The Opera by Queen - Considered by many to be Queen's best album, but not to me, its the second best.

Rumours by Fleetwood Mac - Too much grass and alcohol can turn out really good music. This dysfunctional group at its best. Every song is a gem. This album is one of the reasons why the 60s and 70s were considered to be the best periods for popular music.

How Dare You by 10cc - Not many would select this album but its pure genius. You have to listen more than a few times to love it and then you are hooked for life. Its whimsical, very melodic and adventurous.

Year of The Cat by Al Stewart - Absolutely fantastic folk rock album by an Englishman, very under-rated.

Sheer Heart Attack by Queen - This will always be my top album. Its their raw talent at their finest. If you have a relative 35 and above buy him this for Christmas, if its an over 35 lady, cannot go wrong with Winelight or December.

Missing Out 

That's the trouble with compilation lists. You feel bad that you left out a few which maybe deserve a place as your favourites. Here is a list of those albums that just missed out:

16 Lovers Lane by The Go-Betweens 
A New World Record by ELO
Soul Deep by Jimmy Barnes
The Nightfly by Donald Fagen
Hotel California by The Eagles

Surfing With The Alien by Joe Satriani
Very Best Roll Over by Chage & Aska

A Decade of Steely Dan by Steely Dan

Btw, aren't those album covers wonderful art pieces, certainly stood the test of time.

The Future For Equity Funds

No Annual Fee Fund By Fidelity The biggest news to come out for a long time for equity funds has to be the announcement By Fidelity Inve...