Be wary of Macquarie Group. That’s the brave call made by Charlie Aitken, newly returned to Bell Potter after a stint at his own shop, Aitken Investment Management.
“There appears to be a very large spread developing between what daily priced listed assets are discounting and the ‘valuations’ being used in private markets,” Aitken wrote in his missive to clients on this week.
“The risk is now that privately held assets are broadly devalued. There will have to be increased scrutiny from auditors on carrying values,” he wrote.
“ I believe it’s prudent to be cautious on fund managers who own large investments in private assets, not only because of the negative revaluation cycle, but because the cost of funding these assets has permanently changed.
“In fact, where funding costs have reached, the model may not even work.”
“The game of Private Equity Fund to Private Equity Fund ‘pass the parcel’ has come to an end. The game of ’valuing’ a profitless tech company at ‘last money in’ has also come to an end,” Aitken wrote.
In particular, Australian banks are backward looking and “far too sanguine for what we are witnessing globally”, he wrote.
On one investor call, Washington H. Soul Pattinson this week said they had sold around $400m in Australian bank equity, seeing better risk-adjusted value in bank debt.
“I agree with that view,” wrote Aitken. “(Macquarie) are basically on the wrong side of everything I mention above. From seized debt markets, closed IPO markets, large UK/EU exposure, through the need to revalue assets lower.
“There are global developments and price action I haven’t seen since 2008.”
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