Platinum Asset Management chief executive Andrew Clifford is as conservatively positioned as he was when the world was on the brink of a global financial crisis in 2007.
Although Mr Clifford would not go so far as to say Platinum saw the GFC coming, he said the investment house’s traditionally cautious, patient approach to investing had placed it in good stead.
“We were concerned about the world and pretty conservatively positioned and we were pretty spot on,” he said.
As talks between the US and China, and between the US and Mexico, began to break down last month, Mr Clifford said Platinum had once again “dramatically” brought down its net invested position by about 20 per cent to about 55 per cent.
He said the fund’s cautious positioning might be temporary, “depending on how some of these things unfold. Certainty we’re very cautiously positioned.”
Mr Clifford, who took the reins from Platinum’s billionaire founder Kerr Neilson last July, said it was hard to see an end to the trade stand-off between the US and China. “I mean, who is going to negotiate with someone who backtracks on a deal within days of making one?” he asked.
Mr Clifford said Platinum had shored up its portfolio with cash and by shorting companies as well as index futures.
“Having said that, we would be delighted for our clients if markets moved higher. That’s a better outcome for us all if that happened, but we feel it’s worth having considerable insurance in portfolios at the moment,” he said.
Global instability driven by the US trade war with China and subsequent ban on Chinese telco Huawei, as well as the tariff to-and-fro with Mexico, has sent expectations of global interest rates plunging, with the US Federal Reserve tipped to cut interest rates by 25 or even 50 basis points as soon as next month.
Mr Clifford said in a normal cycle, the economy slowed and markets fell but an interest rate cut put a more positive spin on investors’ expectations about of growth.
But this time, he cautioned, “if the [US] Fed goes ahead and cuts rates, it’ll be more, I think, a reckoning or realisation that environment is weakening”.
Platinum is renowned for its conservative, value-based approach to investing and Mr Clifford has warned against investing in tech stocks such as payment platform companies and software firms.
“If we are seeing a bit of a slowdown here, and it is enforced or further entrenched by concerns over the trade position, the sector of the market that is most sensitive to economic growth is tech,” he said.
Popular technology stocks had not yet reacted to a possible economic downturn, but at the same time were unlikely to shoot up further in response to lowered rate expectations.
“They’re already past the mark of extraordinarily expensive, so I think there’s a low likelihood that we’ll see them go a whole lot higher just because of rate cuts,” he said.
Mr Clifford said the tech market’s imperviousness to a possible rate cut was an example of how counter-intuitive the market could be and reinforced the case for a longer term approach to investing.
“We focus on the price of individual stocks and their five-year prospects rather than on the short-term up and down,” Mr Clifford said.
This article was first published by the Australian Financial Review. Read the original here.
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