A global asset manager has urged SMSF investors to carefully consider large allocations to banks, with Australia in the grips of a “debt-charged housing boom” and the banks potentially under-provisioning for bad mortgage debts.
Speaking at the launch of the Lazard Global Equity Franchise Fund, Lazard portfolio manager Warryn Robertson said Australian investors overall have large allocations to banks and resource companies, and warned that these types of companies are not predictable.
“If you stood back 20 years ago and tried to predict what credit growth was going to be in Australia, you would have massively got it wrong. You would have underestimated it and, yes, the banks made a lot of money, [but] there’s no real rationale around which to give those estimates,” Mr Robertson said.
Mr Robertson said most SMSFs, excluding his own, contain Commonwealth Bank shares and are massively allocated to the banks.
He is particularly concerned since Australia has not been in a recession for more than 25 years, which may have led to false confidence among the banks and investors.
“I have never worked in a recession, and that is frightening because you don’t know what it's like. You travel to other countries and you see what economic downturns are like, and it’s a very different world,” he said.
Mr Robertson warned that the banks could be under-provisioning for bad debts because of the lack of recession in the country, and people believe that mortgages are infallible from the bad debt provisions.