He returned 10,000 crs to investors on bubble concerns


Philip Parker, Altair Asset Management, Australia

He's blunt, he's forthright, he calls a spade a spade. Earlier this year, when he saw the bubble building up in Australian real estate (Australia and Canada are widely seen as bubble zone property markets) and the rapidly escalating Chinese debt situation (70% of Australian exports are to China), he became convinced that Australian equity markets are in for a hard landing. Rather than talking to investors about the "long term view", he bluntly told them that he sees a bubble which he is not comfortable with, and therefore decided to sell out all his holdings and return the money to his investors. This decision took away fee income from the AUD 2 billion of assets he was managing - but he did what he thought was right for his clients - which was to preserve their capital by giving it back to them at a time when he found no convincing investment opportunities.


Philip Parker is an investment manager with a difference. He believes in telling the truth about markets bluntly. So much so that earlier in the year, he sold all the assets under management and returned the cash to the investors!

Parker began his wealth management career when he co-founded Hunter Hall Investment Management Ltd. in 1993. In 2000 he established Parker Asset Management Limited. Subsequently he started Altair Asset Management as a vehicle to fulfil his own vision in investing. His investment background includes 29 years of experience in managing funds, dealing and advising on shares, options, bonds and equity derivatives in Australia and international markets in New York and London.

Investment Philosophy

Parker's investment philosophy is that profitability is not a measure of success unless it can be achieved repeatedly and consistently over a long period of time. He believes in evidence based investing. He uses his judgement in a sincere effort to utilise the evidence currently available to arrive at the best investment decisions. He bases his opinion on a balanced assessment of fundamental and technical analysis, informed by solid evidence, sound logic and relevant data. All this is made possible by a team of investment professionals that blends practical investing and academic finance with hypothesis based research.

Investment Strategy

Parker's Altair Management believes in delivering competitive performance by using disciplined investment strategies. It prefers to focus on the long term. Rather than going after theoretical profits using high leverage and associated risks, Altair takes a low risk approach to deliver consistent returns to investors. Altair does recognise that earning profits are of paramount importance, yet it likes to keep clients 'capitalfunds safe. Its approach is to mitigate risk and then allow the good profits to flow in by utilising established trading strategies.

Altair Management

The base of Altair Management's investment strategy is a singular mix of automation and statistical management. The key feature of Altair's proprietary system is its capability for autonomous adaptability. It employs a unique system of neural networks with insights from a diverse in-house team of professionals. Further, there is an artificial intelligence system that evolves and keeps abreast of the infinitely dynamic market conditions. This system can internalize the inter-relationships of the asset classes under consideration and by using high frequency pattern recognition take advantage of their price correlations. By using a weighted adjustment of prevailing factors Altair manages to attain the desired rate of returns even while adhering to various risk control practices. Additionally, the company's automated system calculates the risk and rewards ratios to obtain the best results. In all this, money management is given utmost importance.

Altair's system encourages a full spectrum analysis of market data and all other normal market parameters. There is an internal mechanism to identify trades combining the lowest risk profiles with highest profit probability. But its real strength lies in the company's penchant for independent research. This research is shared with all stakeholders inside the company. Headline economic news,which often does affect marketmovements,is also factored in. Altair attempts to achieve a perfect combination of optimized automated trading with monitored manual input in order to have a leading edge in dealing with managed trading.

Investment practises

Altair places the highest importance on protecting their clients' interests.

Their manifesto is: We understand that consistent and realizable returns stem from minimizing downside volatility by taking both long and short positions across different asset classes to generate uncorrelated returns as well as embedding risk evaluation in portfolio construction. In addition, it is our practice to invest alongside you. Altair's own assets including those of our portfolio managers are invested in the respective funds they manage. You can be assured that your interests are well taken care of when directly aligned with the very interest of our own managers. (www.altaw.com)

Altair puts its main focus on clients' needs. They aim at the best performance at the lowest cost. They take care to give proper information and feedback to clients and equally they are open to receiving suggestions from them. They believe in transparency and clients are fully informed of the status of their assets, the performance of the assets and all related developments. Preserving clients'capital is a matter of utmost concern for Altair.

Extraordinary decision

On May 15 this year, Philip Parker made a surprise announcement. He said that Altair Management had decided to "sell all the underlying shares in the Altair unit trusts and to then hand back the cash to those same managed fund investors." This would involve the liquidation of hundreds of millions worth of investments. This decision is all the more surprising since Altair enjoyed double digit growth on the ASX in the last year. The company would have to forego fees that would have accrued from a $2 billion advisory agreement.

According to Parker, the following are the concerns that prompted his astounding decision. Firstly, there is the Australian east-coast property market "bubble" and its "impending correction"; he worries that issues around China's hot property sector and escalating debt levels will blow up "later this year"; he feels that there are "oversized" geopolitical risks and an "unpredictable" US political environment; he then points fingers at the "overvalued" Australian equity market. But the final straw was the overheated Australian property market, which according to Parker presents the greatest danger. "If they get a property downturn anything similar to 1989 to 1991 then they are going to have all sorts of issues," Parker said.

He further said that Altair's investment team was being disbanded. According to the Sydney Morning Herald he said, "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 interest."

This does not mean that Altair Management's existence as a business will be at an end. He said that he wanted "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."

Wise words

"We think that there is too much risk in this market at the moment, we think it's crazy," Parker said with a candidness few of his colleagues are capable of, at least when still managing money.

"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," Parker said. "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."

"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." (www.zerohedge.com/news/ by Tyler Durden May 30, 2017)


Content is prepared by Wealth Forum and should not be construed as an opinion of HDFC Mutual Fund.

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