Sell everything! Big investor warns calamity is close

A top fund manager has told Australia: “We’ve been living in this fool’s paradise,” after making the decision to liquidate his company’s Australian shares funds and return “hundred of millions” of dollars back to clients. 

The impending property market “calamity” and the “overvalued and dangerous time in this cycle” were cited as the main reasons Australian asset manager Altair Asset Management decided to pull up stumps.

“Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests,” Philip Parker, Altair chairman and chief investment officer, said in a statement.

“I would like to make clear this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point.”

Parker, who is a 30-year veteran of funds management, said on May 15 the company advised all its clients of the plan to “sell all the underlying shares in the Altair unit trusts and to then hand back the cash to those same managed fund investors”.

“We think that there is too much risk in this market at the moment, we think it’s crazy,” Parker candidly told the Sydney Morning Herald.

“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.”

Parker’s decision comes after a strong year of double-digit gains on the Australian Stock Exchange.

In addition to that, Parker said he was acting on his conviction by returning money to clients.

He’s also generously abandoned the fees attached to the $2 billion advisory agreement. 

Parker is confident he’s made the right decision, saying, “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.”

Parker also 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.

Do you think we’re headed for doom?