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Alistair Lumsden, a portfolio manager of a $1.5 billion ABS fund at the $11 billion asset manager CQS, says the U.S. housing crisis is far from over.Lumsden spoke at CQS’s client conference today, where he predicted that home sales would fall up to 10% in 2012.
To support his claim, he said:
- 1 in 5 U.S. home sales is a forced transaction
- You have 11 million or more units of distressed supply, and a limit on credit available
- There is a significant amount of supply that will keep prices stable when they get there.
- The large inventory of US homes expected to be offloaded by distressed sellers, coupled with constrained financing from US banks and agency lenders, means there are more problems to come in the housing market.
- A lack of credit means about 30% of all US house purchases are all-cash transactions – “not a great signal” – and the US government has said it will try to withdraw the amount available through agencies Fannie Mae and Freddie Mac.
“What will be key,” he says, “will be existing home sales over the next two to three months, and how much distressed sales go up.”
“If we see an increase in distressed sales that will impact the level of home prices in the home price indices, and the indices are an important part of the psyche of the underlying economy.”
What’s looking better to him? According to Investment Week, he said that more opportunities are likely to arise in Europe, especially if Greece restructures its debt.
As far as his track record goes, CQS is an $11 billion fund managed by Michael Hintze, and at least some of CQS funds have had strong years recently. Lumsden’s fund was up 179% from June 2007 to June 2009, according to Investment Week. And in 2010 (through November), CQS was up 27.44% in its Directional Opportunities fund, 14.33% in its ABS Feeder Fund, 7.48% in its Conv & Quant Strats Feed Fund, and 12.47% in its Diversified Fund (managed by James Peattie).
Here’s more on Lumsden, from his profile on SPS Conferences, a conference he spoke at recently –
- Chief Investment Officer of ABS and is responsible for devising and executing the Asset Backed Securities (ABS) strategies with a particular focus on investing in US MBS and Home Equity Loans (HEL).
- Ran the Asset Management Desk within Rabobank‟s Vehicle Management Group
- Was a founding member of the management team responsible for the launch of Rabobank‟s Tango structured investment vehicle, where he had primary responsibility for managing the $10 billion asset portfolio.
- Was a Portfolio Manager at Abbey National Treasury Services where he invested in a variety of MBS and ABS securities, with primary responsibility for developing the bank‟s $15 billion HEL portfolio from 1995 to 2001.