Altair’s “Sell Everything” Bold Move

You probably saw the news yesterday of the Australian asset manager Altair Asset Management headed by Aussie investment stalwart Philip Parker liquidating all its Aussie equities.  He made the bold decision to return “hundreds of millions” of dollars to their clients on his firm belief there is an imminent property market “calamity” and that we are in an “overvalued and dangerous time in this cycle” in shares, forgoing of course his fees on those hundreds of millions.  

This story is extraordinary for a couple of reasons.  First it is rare we get such a forthright assessment of a market from such a respected, 30 year veteran of financial markets, and secondly that we see a genuine care for investors by not just sounding that warning but by taking the selfless decision to return funds to investors and forego both management and performance fees to protect their interests.  That, dear reader, is exceptionally rare and why we saw such carnage in the likes of the GFC when fund managers kept share portfolios full despite the obvious warnings.  But not all agree, and it drew this question and analogy from the AFR yesterday:

“Still, isn't that Parker's job? To make money for his clients, particularly during difficult periods? One trader on Twitter likened it to a cricketer who, when things get tough, just takes his bat and ball and heads home. A quitter, in other words - no ticker.”

Ummm… your hard earned wealth is not a cricket game and his (and all other fund managers) “job” is to make or at least protect your wealth.  They are not magicians that can make you money when a market crashes 50-80%.   What Altair has done is consistently outperformed the market and seen double digit gains since inception.  Sometimes you need to take your profit and walk.

Again from the AFR:

“Mr Parker outlined a roll call of "the more obvious reasons to exit the riskier asset markets of shares and property".

They included: the Australian east-coast property market "bubble" and its "impending correction"; worries that issues around China's hot property sector and escalating debt levels will blow up "later this year"; "oversized" geopolitical risks and an "unpredictable" US political environment; and the "overvalued" Aussie equity market.” 

So what exactly did he have to say about this market?  Here are a few more excerpts:

"We think that there is too much risk in this market at the moment, we think it's crazy….Valuations are stretched, property is massively overstretched and most of the companies that we follow are at our one-year rolling returns targets – and that's after we've ticked them up over the past year….Now we are asking 'is there any more juice in these companies valuations?' and the answer is stridently, and with very few exceptions, 'no there isn't'."

"Let me tell you I've never been more certain of anything in my life….I am absolutely certain we are in a bubble in this property market."

"Mortgage fraud is endemic, it's systemic, it's just terrible what's going on. When you've got 30-year-olds, who have never seen a property downturn before, borrowing up to 80 per cent to buy three and four apartments, it's a bubble." 

[in reference to our major banks] "If they get a property downturn anything similar to 1989 to 1991 then they are going to have all sorts of issues," 

"Australia hasn't had its GFC event, we've been living in this fool's paradise. But if China slows down the way the guys think it will towards the end of this year, then that's 70 per cent of our exports [affected]. You can see already that the commodity market is turning down." 

Maybe an apt continuation of the previous cricket analogy is that when there are a multitude of lightening strikes approaching the cricket ground, taking your bat and ball and heading for a safe haven may be the best decision for your wellbeing; it’s not quitting, it’s survival.  At the very least don a golden lightening rod to protect you if you want to face a few more balls…