On Art, On Society

Pop Art and the Political

Not too long ago I visited the British Museum’s American Dream: From Pop to Present exhibition, which documents the American pop art movement from mid-century to present day. With Andy Warhol’s Brillo Boxes and prints of celebrities firmly lodged in the collective consciousness, we assume that pop art is about using luscious colour palettes and new printing techniques to elevate banal objects and create icons irrespective of the subject’s actual characteristics. Yet this aesthetic has often been the medium for social commentary and critique – a point that the British Museum exhibition drives home most effectively.

Sure, some pop artists were not always politically charged. Take Ed Ruscha. Having published a book of 26 photographs of gas stations in the early ’60s, he expanded on the theme with a series of vibrant prints of one particular Standard station, chosen for its appealing geometric composition (after a little manipulation of some of the proportions and perspective, of course). Whilst this particular gas station was located in Texas, the print evokes the sunny optimism and sheen of Ruscha’s home city, Los Angeles. The artist often played with LA or California as themes for his work, screenprinting a series of Hollywood signs and using an innovative process to produce ‘liquid words’ spelling out “Made in California” in the saturated colour of freshly-squeezed juice.

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While American pop art has often concerned itself with capturing a vision of an increasingly affluent and commercialised USA, political undercurrents have frequently surfaced and left their mark. American Dream displays many examples of this, a few of which have really stuck with me. Chief among these is Andy Warhol’s deeply unsettling depiction of Richard Nixon, with his burning orange eyes, a near-gangrenous complexion and the tagline “Vote McGovern” as the deathblow. Willie Cole’s woodcut Stowage also makes for uncomfortable viewing; it comprises a blueprint of a slave ship and a border of irons to illustrate the continued servitude African Americans faced long after slavery was officially stamped out. More lighthearted yet still powerful are the posters produced by the Guerrilla Artists, an anonymous group with the mission of raising awareness of sexual discrimination in the art world. The exhibition shows that even Lichtenstein has taken on a political lean in his time: his instantly-recognisable comic book art parodies have featured above poems critiquing conservatism in society.
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Do Women Have To Be Naked To Get Into the Met. Museum? 1989 by Guerrilla Girls

The exhibition ends with a cold reflection on the American dream. One print calls out, “GOING OUT OF BUSINESS CALLING IT QUITS EVERYTHING MUST GO” – a nod to the dreaded economic burst bubble and its casualties.

In many ways, society has improved dramatically since the pop artists started codifying social ills through printing. However, aspirations and optimism have been beaten down by economic strife, political apathy and chronic cynicism that shows no signs of abating. And the progress made towards equal rights for women and ethnic minorities in Western culture is by no means secure in the current climate.

Trump has promised to resuscitate the dream, make America great again. Sadly, Andy Warhol is no longer here to emphasise the absurdity of his hair, brows or pout with a rainbow of colour. Will a new breed of pop artists assume the mantle of political activism through print?

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On Music

Musical Milestones

On Christmas Eve, 2015, the Beatles back catalogue went live on streaming sites. Around the world, people hastily formulated and executed half-baked excuses to evade ‘family time’, find solitude in a darkened room, light a candle and curl into the foetal position while hitting ‘play’ on Rubber Soul on Spotify. Or so I would assume.

There was once a time when my listening habits were not under the influence of aggregation software, convenience, helpful yet slightly unnerving algorithms. My first  experience with the Beatles – also my first memorable experience of music really, discounting my early experimental phase involving Lamb Chop the puppet’s The Song That Doesn’t End – was 23 years ago. For me, a significant portion of father-daughter time was spent listening to what I knew then only as the LP With The Apple On It in Dad’s cluttered record room next to the garage, the latter serving as a no man’s land for soundproofing purposes.

Everything about the record room delighted me: the refuge it provided from the world outside, the sheer number of LPs and CDs stowed away using the Organised Chaos Method, and even the smell that I would later come to identify as a bouquet of vinyl and dust. The paraphernalia of music can often be as comforting as the sound itself; years later I would find myself burrowing through the tightly-packed shelves and boxes of the Rough Trade shop under Slam City Skates in Covent Garden (RIP), seeking solace from the standard minutiae of teenage existence.

The record room was also the birthplace of dozens of mixtapes. Whenever watching the John Cusack character, Rob agonising over the production of a decent mixtape in High Fidelity, I’m reminded how it used to be done. Today, a flurry of mouse clicks and keyboard taps can create a playlist in minutes, or even seconds. If Nick Hornby’s Rob Fleming was brought into the 21st century, he would have something very disparaging to say about this, and I would be inclined to agree with him.

The ease at which one can pull together a reasonable playlist is in one sense wonderful. Yet it’s all a little too easy now; when the making of a mixtape was a more time-consuming endeavour and confined musos to a limited number of songs, you really thought about what should be included and in what order. Having to sit through the recording of songs from tape to tape or CD to tape in realtime encouraged meticulous playlist building.

You would also be incorporating songs from the radio on mixtapes as a matter of course. Another big evolution in music has been the move towards greater affordability – first found in illegal downloading through the likes of LimeWire and Kazaa, and then in legal streaming. Previously, if I wanted to feature a newly-released song that I didn’t own and couldn’t justify £3.99 for the single of, I would pray to the gods of Radio 1 and Xfm for it to be played soon, without too much inane banter impinging on the beginning and end of the song.

Buying compilation CDs was also a way of getting more bang for your buck. As a pre-teen, I shunned the likes of Mizz and Shout in favour of the Top of the Pops and Smash Hits mags, almost entirely to get hold of the free sampler CDs. This habit would continue but with more discerning reads: Rock Sound, Kerrang! and the NME. And I still sometimes navigate the chronology of bands and genres by means of old NOW That’s What I Call Music compilations. Sure, each tracklisting would be punctuated with musical land mines, but skipping past the Lighthouse Family and Janet Jackson to get to the likes of Natalie Imbruglia’s Torn and Catatonia’s Mulder and Scully – both shining examples of late ’90s guitar pop – was a relatively small inconvenience to bear. That was NOW… 39, my first.

Today, the name Now That’s What I Call Music is an oxymoron – all land mines, no gems. Maybe this is just me being overly forgiving of the music I grew up with and overly scathing of the new and auto-tuned. But hell, Selena Gomez, Ellie Goulding, Rita Ora, Carly Rae Something – none of these ladies have a patch on Alanis Morissette or Shirley Manson (frontwoman of Garbage). Who’s providing the soundtrack to over-egged, self-indulgent, female teen angst these days?

Music TV is another formerly reasonable source of music that has fallen from aural grace. MTV originally did exactly what it said on the tin. After school I would flick incessantly between the many music TV channels on Sky, creating a dizzying blend of dismissed songs and ads and much irritation to my parents. Hundreds of music videos made it on to VHS tapes. I worshiped directors like Spike Jonze and Michel Gondry for their artistry; Jonze actually directed the first ever music video I saw, Weezer’s “Buddy Holly”, which was curiously  included on a Windows 95 sampler CD. Microsoft was cool once.

Today, MTV is synonymous with reality TV. 16 and Pregnant is a sorry substitute for Nirvana’s “Heart-Shaped Box” video and, almost impressively, more depressing. Moreover, creativity in music video production now seems confined to elaborate costume design and increasingly sexualised motifs (thank you, Lady Gaga and co.). The wholesome days of Dave Grohl frolicking on a plane in various guises (“Learn to Fly”) are long gone.

This trip down musical memory lane might seem too sentimental; that’s not my intention. Nostalgia-tinged lamentations aside, some musical innovations have been hugely positive. The popularity of music mags has waned as the number of music blogs has mushroomed. YouTube has obliterated the frustrations of music channel flicking. Streaming services have widened access immensely and facilitated the discovery of new music in a big way. Music flows throughout my flat from a WiFi speaker I can control with my phone or laptop, like magic.

Yet there is something very special about those early experiences with vinyl, mixtapes and music videos. Could they be replicated in essence today with technologically-advanced equivalents? I’m not so sure. Again, I think back to the Beatles – specifically, the time my father turned off one of his speakers during “Paperback Writer” so that I could hear them singing the French nursery rhyme”Frère Jacques”. Like magic, only somehow better.

 

 

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On Society, On Travel

Found in translation and footsteps

while back I wrote about the negative psychological externalities of city life: the paradoxical feeling of isolation in claustrophobic environs; dissatisfaction caused by too much choice; and fear of missing out (which has even become a popular acronym, FOMO). If I were re-writing the piece today, I would add ‘busyness one-upmanship’ to the list – another urban pet peeve.

What struck me recently is that the English language doesn’t cater to those trying to convey the need to get away from city life from time to time, for a certain kind of respite. The German word Waldeinsamkeit denotes the feeling of being alone in the woods – a very specific sense of solitude that I believe urbanites crave on occasion. Fernweh describes the need for distance, a kind of homesickness for a place unknown. Staid surroundings can make one feel lethargic.

We can’t express it, and a lot of the time it seems like we can’t experience it either. How does one capture woodland solitude or satisfy the travel bug when in full-time employment in London? The answer may just be found in the wisdom of walking advocates.

Adam Gopnik is a New Yorker writer with a flair for dissecting the banal. In his article Why We Walk, he summarises what other writers have opined on writing as something more than merely a mode of transport. Walking as a sport seems a little far-fetched; however walking to spur contemplative thought is pretty compelling. Recalling briefly his own experience:

“For a long time in the nineteen-eighties, I seemed to do nothing but walk around the city. I was blessed by several bits of new technology: by the first great age of the modern sneaker, for one, which allowed even the flat-footed to stride on what felt like cushioned air. And then the Walkman made every block your own movie. Just as the period of the first flâneurs falls between the rise of gas street lighting, which opened the city to twenty-four-hour circulation, and the onset of the automobile, which made cities loud again, so walking in the nineteen-eighties lay between the invention of the Walkman, which suddenly neutralised the noise of the automobile, and the onset of the iPhone, which replaced isolation-booth serenity with our now frantic forever-on-guardness.”

This side of the Atlantic, Will Self champions the city walk. His articles on the subject argue for reconnecting with the physical environment and people, and not falling prey to the constraints of corporate culture. Similar to Gopnik, he laments how mobile devices have – ironically – disconnected us from the world.

“Her responses to her fellow city dwellers, to the road traffic, to the business of finding her way using a handheld GPS system while listening to music on her MP3 player are all quite normal, and yet, set down like this they seem to me to be indisputably analogous to a clinically defined psychotic state. Like a sufferer from psychosis, our young woman’s conception of reality radically diverges from her environment: she is surrounded by actual buildings, with a defined and apprehensible nomenclature; the people she passes are neither clones nor individually known to her but a mass of strangers; neither these people, nor their vehicles are moving in sync with the music she listens to; and finally: her perception of distance is distorted, while her ability to negotiate her environment is dependent on systems external to her own mind that, for all their technical efficacy, are as opaque to her as the magical rituals of a shaman.”

For me, walking is a joy. Sometimes an adventure. A time for reflection. For new ideas to germinate. Walking can also be a great comfort, helping to alleviate all sorts of emotional stresses and strains.

So naturally, I concur with Gopnik and Self and would offer the following advice to others. Wander aimlessly. Look around you and tune out of the podcast. Put your phone somewhere hard to reach (and don’t buy an Apple Watch!). Indulge in the moment, rather than focusing on where you’ve got to get to or fogging over with nostalgia. Do as the French do, and flâner.

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On Investing

Which came first: the chicken or the ad?

How performance, marketing and flows relate to one another is a fascinating problem. Which came first: the chicken or the ad? Or indeed the chicken or the ed(itorial)? By tracking ad appearances and editorial mentions across the trade titles, Research in Finance endeavours to help groups better understand the interplay between press advertising and asset movements.

Looking at flows first, equity funds have seen substantial redemptions in recent months. Notably, Japan funds and Europe funds have bucked the overall trend – unsurprising given their strong YTD performance. ‘QE To The Max’ and changes in corporate governance have encouraged investment in Japanese companies; investment in Europe has also been spurred by QE, as well as some attractive Price/Earnings ratios.

Meanwhile the mixed asset space continues to report healthy net sales figures. A flurry of multi-asset income marketing campaigns have launched in response to the new pension freedoms. Many advisers voice scepticism around new fund launches and say they prefer to focus on tax planning (in particular IHT planning), cashflow modelling, risk profiling and increasingly ‘bucketing’ clients’ short-term and longer-term income needs. As such, multi-asset income funds may not represent a panacea for drawdown, but there is evidently a place for these funds as a relatively low-cost solution for smaller pension pots.

Honing in on the RiF Tracker data on advertising, we can see that general brand building and multi-asset funds – largely represented by the Mixed Investment 20-60% Shares IA sector – were big focal points for fund houses in H1 2015. Naturally, the biggest sectors in terms of number of funds and assets have strong ad representation. Interestingly, Japan and Europe Ex UK have not been heavily advertised in the trades relative to other sectors, despite inflows. US funds have enjoyed good ad representation, over a period where the NASDAQ has been performing well compared to the S&P, encouraging a move from passive to active for US equity. However, it’s really just a couple of fund houses driving ad activity in this sector: Artemis and Fidelity to a lesser extent.

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Intuitively, one would think that editorial sentiment is typically more strongly correlated with performance than advertising. Overall the UK Equity Income sector has had a great year so far for positive coverage. Performance has been reasonable, but lagging UK Smaller Companies, which has had comparatively stellar performance in 2015 and a fraction of the coverage. True, the UK Equity Income sector is much larger and thus attracts more attention, but there is still a bit of a disconnect between performance and positive trade press mentions. Moreover, the ‘Woodford factor’ cannot be ignored: trade journalists have been writing reams about his funds. Unfortunately this concentrated focus may have been at the expense of other good investment ideas receiving coverage.

Funds in the Europe Ex UK sector have been getting a high number of positive mentions across publications, and performance has been very respectable. Conversely, Japan funds are very low down the priority list for the generalist mags despite very strong performance, although coverage has been better in discretionary mags.

Many of the funds in the Mixed Investment 20-60% Shares sector received strong positive mention in H1, although less so across publications targeting discretionaries than more generalist titles. YTD performance has been muted, but one acknowledges that shoot-the-lights-out performance in rising markets is often not the primary reason behind investing in a multi-asset fund.

The Global Emerging Markets sector does well in terms of both trade ad and editorial coverage, and yet has experienced negative performance YTD. Short-term spikes in performance a few months back could be responsible for some of the positive mentions in magazines; sadly indications of economic slowdown in China were quick to extinguish any short-term gains.

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These are just a few high-level take-outs from the RiF Tracker, underlining the complexity of monitoring the impact of trade press coverage, and what drives coverage in the first place. Sometimes flows, performance and coverage all seem to move in tandem; other times the feedback loop leaves room for improvement.

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On Investing

Asset managers must adapt to new gatekeeper approach

Asset management businesses are grappling with some serious challenges at the moment. Reshaping their relationships with intermediaries in a post-commission world and identifying who the investment decision-makers really are in the remodelled advised market are arguably chief among these.

The starting point for meeting such challenges is understanding the increasingly important role being played by the company-wide, or centralised, investment process (CIP). For the majority of advisory firms, this has become the way that investment business is done. Almost four-fifths of advisers report that their firm has a centralised investment process in place; 84 per cent of advisers adhere to one if you exclude one-man bands from the numbers. These stats are encouraging. Many firms have responded to regulatory change and gone a long way to implementing processes that help individual advisers deliver investment advice consistently across a firm’s client bank.

The acronym CIP is bandied around, reverberating off the walls of City offices when talk turns to how to engage with today’s (and tomorrow’s) brand of advisory firm. But what actually is a CIP?

Sometimes the P stands for process; other times proposition. Thinking about process, firms are increasingly implementing measures that allow them to deliver consistent investment advice: an investment committee with ultimate decision-making power, risk profiling to help determine asset allocation and a centralised investment proposition to map on to the desired asset allocation. Often, there is also a process through which advisers can make a special case for deviating from the centrally-imposed parameters.

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A rising proportion of advisers are buying into the concept of a CIP – both process and proposition. Waning support for bespoke portfolio design is indicative of this general trend, with Platforum research proposing a ratio of bespoke to model solutions (including model portfolios and fund of funds) of 45:55.

Many advisers are embracing model portfolios on the grounds of business scalability. Using an attitude to risk questionnaire linked to a set of model portfolios means that advisers can take on more clients and give more attention to the wraparound financial planning service. This point is of growing relevance to DFM businesses providing investment management for advisers’ clients – there will be a limit to the amount of outsourced bespoke business they can take on. DFMs we speak to echo that bespoke treatment for asset allocation and fund selection isn’t necessary in the majority of cases. Moreover, the additional cost for a bespoke portfolio that looks very similar to one of the model portfolios is being called into question. A minority of clients have particularly complex needs, or simply want the experience of bespoke because they like the feel of the premium customer service. For the rest, bespoke portfolio services probably don’t represent good value for money.

Growing support for model portfolios goes beyond pragmatism, or fear of the regulator. To some extent, the shift seems to reflect a relatively new philosophical belief in how investment advice should be given. Exemplifying the point, one adviser told me: “I believe in a replicable process. I previously worked at a firm where two virtually identical clients were invested in different funds – why would that be? Why would you have a bespoke approach for everyone? You bespoke the tax wrappers but not the fund selection.”

Investment decision-making is becoming increasingly centralised within advisory firms, as well as more broadly. Similarly, client portfolios are purposely being designed to look more alike within individual firms and across the advised market, thanks to CIPs and the shift towards model solutions. Change has been positive insofar as firms have undoubtedly become more professional in how they handle investment business. However, change is also driving greater fund concentration, which in turn raises a number of issues for the industry.

What we’ve been preaching for some time now is that fund houses need to refocus their sales efforts. The challenge is no longer how to sell to individual IFAs; it’s how to sell to investment committees and gatekeepers, as well as individuals in some instances. Moreover, salespeople need to be more alert to where advisers perceive gaps in their in-house or bought-in fund panels, and conversely the product areas for which they really don’t require a ’me too’ fund. Thinking about the implications of fund concentration for the investment team, difficult decisions have to be made about capacity issues, and how one accommodates increasingly lumpy inflows and outflows as funds are added and removed from CIPs. Such are the ugly truths about advisers’ model behaviour.

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On Investing

Follow the leader

For an investment-related topic worth pondering, I’ve been inspired somewhat by this article on the negative impact of fund manager moves – both from the losing fund house’s and the end-investor’s perspective. Substantial outflows occur; investors missing out on the news of a move are caught out; and those in the know can be confused regarding the best course of action to take. Meanwhile, Woodford Equity Income has swelled to £6.2bn, with Jupiter AM’s Merlin range accounting for almost £1bn of that overall figure.

Some high-profile fund manager moves have evidenced the propensity of both intermediaries and direct investors to follow individuals. These real-life, modern-day Pied Piper of Hamelin figures put money in motion and shake up researchers’ recommended fund lists. Understandably, fund houses are now looking to downplay star quality, and instead emphasise team approach and investment process.

Advisers tell us that fund manager personalities don’t hold sway when they’re selecting funds, and that consistency of team and process matter to them. Yet stated intention and actual behaviour – as any good little researcher knows – often don’t align perfectly. Over 70 per cent of advisers consider three-year rolling averages an important factor when assessing fund performance; commonly a minimum track record of three years is a baseline requirement. But when a ‘star’ manager ups sticks, individual track record can trump all other fund selection criteria. In any case, almost three-fifths of advisers consider individual fund manager track record when assessing fund performance.

It is questionable whether we should revere fund manager track record in the first place. This isn’t something I’d really thought about before, until an adviser pointed out, “I’d rather have Harry Kane in my [football] team than Beckham… It’s taking a bit of a risk because he’s only had half a season, but I’d like the performance of Beckham from a 21-year-old.” Fresh talent is great, but it comes with risks attached.

Does anyone in fact benefit from fund manager upheavals, apart from the individuals themselves? Maybe boutiques do. Managers from the largest fund houses can crop up at smaller outfits – think Julie Dean’s move from Schroders to Sanditon AM. Personally, I quite like this kind of redistribution of talent – it gives the smaller providers a better chance of gaining traction with advisers and perhaps even end-investors.

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On Investing

Advisers’ platform choices reveal their colours

The type of platform favoured by an advisory firm is usually a good indicator of what type of firm it aims to be. The platform due diligence required by the FCA means that advisers have to document the reasons behind their choice of platforms – this forces them to evaluate their client book and select the platforms that best meet their needs.

All 20 or so adviser platforms have their peculiarities; however we can categorise the platform market in a number of ways: size, relative suitability for different client segments, degree of vertical integration etc. Most simplistically, the industry tends to make a distinction between the oldest, biggest three platforms in the market – Cofunds, Fidelity FundsNetwork and Old Mutual Wealth – and the newer offerings. These first three are commonly referred to as fund supermarkets, which offer fewer types of investments and tax wrappers and historically ran a remuneration model based on rebates.

Conversely, the ‘wrap’ platforms are so-called because they are seen to offer a wider range of investment options – ETFs and DFM access, for example – and tools. These platforms have operated an explicit charging model since their inception.

Advisers still predominantly using the fund supermarkets look quite different from those wedded to the wrap platforms. Segmenting the two groups by the platform they use the most, we can learn a fair bit about the different types of advisory businesses in the market. The chart below illustrates how investment propositions vary depending on primary platform used. Bear in mind that although an adviser may tell us that their primary platform is Cofunds, they are still likely to be using one or even multiple other platforms.

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Still, the disparity between the two groups is stark. In the wrap camp, advisers are placing significantly more assets through in-house model portfolios. The fund supermarket loyalists, on the other hand, still have the bulk of clients’ assets in bespoke portfolios – mostly designed in-house. Roughly a fifth of the wrap group’s assets are managed by DFMs on a model or bespoke basis, compared to a tenth of the fund supermarket group’s assets.

What strikes me when looking at these research results is the extent to which a certain segment of the advisory firm has changed little in response to the RDR. These – mostly one-man band or similarly small firms – have not left the profession in droves as predicted. Yet the sustainability of their business model has been thrown into question. Very recently I spoke to an adviser at a mid-sized firm, who made the point very clearly to me: “Most IFAs don’t have a research team that is big enough or a process that is robust enough to strip out fund managers they know and enjoy, and pick the best funds for their clients. Advisers should be out seeing clients and winning business.” On the flip side, it may be more difficult to articulate one’s value as an adviser if this doesn’t include fund selection. Damned if they do, damned if they don’t, you could say.

Over the past few years, consolidator firms have been hoovering up some of these smaller firms. This acquisitive activity looks set to continue. Consolidators seek to bring acquired business into the fold of their centralised investment process. This is a challenging task involving a lot of extra communication with clients to convince them to accept a portfolio revamp, but once achieved it will see a shift away from bespoke portfolios.

A potential decline in the number of one- or two-man bands will have an impact on the platform market. One may expect wrap platforms to be the main recipients of new clients; net sales data over the past 18 months supports this, and for the first time in the first quarter of this year, the collective market share of the three fund supermarkets fell below 50 per cent. However, Old Mutual Wealth now offers a host of OMGI-managed investment solutions that could plug the gap. I also suspect that over time, portfolios built via fund supermarkets will start to look more like those on wraps. Many advisers now believe that for accumulation portfolios at least, there is less need for individually-tailored portfolios – the bulk of clients have quite similar needs and fall into a narrow band of risk profiles.

And if nothing else, regulatory pressure will drive conformity. “If you don’t want to get shot, don’t go into a warzone,” exclaimed one high-end IFA to me. Unless, I suppose, you have a sufficiently substantial battalion in tow.

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