Funds manager PM Capital has sold out of its entire position in Australian banks and urged retail investors to move their money offshore.
According to PM Capital founder and chief investment officer Paul Moore, Australian investors are in the middle of a “very long bear market” and should take advantage of the strong Australian dollar to invest in the wider opportunity set available offshore.
He predicted the Aussie dollar would fall to around 80 cents, and possibly as low as 50 cents, which would favour global equity returns.
Moore added that pension funds and retirees chasing yield had pushed the price of the domestic banks up and they now traded at a “significant premium to global peers” such as Well Fargo and Lloyds, which presented much better value.
“One thing that stands out in the current investment framework is that the Australian dollar is at a record level and yet the average self-managed superannuation fund has only a 1 per cent exposure to global equities based on data from the ATO,” he said.
Moore said retail investors were always painfully slow at identifying and capitalising on investment opportunities.
“The last money to flow into an asset class is retail and it usually comes in at the peak,” he said.
“So you just need to look at where the retail investors have the least amount of exposure and be there, and that’s global equities.”
“Retail investors have the largest allocation to cash and term deposits around the world, so you don’t want to be there.”
“You don’t need to be too clever to realise you can get more bang for your buck offshore.”
The PM Capital global equities fund is overweight technology, monopolistic service providers, global brewers, US and European banks, and US residential property.
