Interest rate rise is coming, warns Alex Waislitz

While he positions his portfolio to cope with a rate rise, the billionaire investor admits he needs to do a better job telling his LIC shareholders about his strategies.

Alex Waislitz admits he has to tell a better story to investors about his LIC investment strategies. Picture: Aaron Francis/The Australian

Name: Alex Waislitz

Age: 63

Lives: Melbourne

Estimated wealth: $1.65bn

Source: Investment

Secrets of success: Growing assets of private Thorney Investments over $1bn, starting two listed investment companies Thorney Opportunities, Thorney Technologies

Source: The List – Australia’s Richest 250

Billionaire investor Alex Waislitz insists it is only a matter of time until inflation arrives and causes a rise in interest rates in many countries around the world.

Waislitz has been warning for the best part of this year about the “spectre” of inflation, and tells The Australian that a combination of restricted supply chains in many sectors and a lack of workers that pushes up wages will result in inflationary pressures across the economy.

“We‘ve had historically low interest rates for a couple of years and the question is how long will it stay down – and I don’t believe that it will stay down at this level,” Waislitz says.

“I think we‘re seeing the bottom of it now and to me it’s inevitable, it’s just a question of when and how quickly they’ll go up. I would be surprised if it didn’t happen in 2022 and even at the latter end of this year.”

When rates do go up, Waislitz says, it will mean, in the short-term at least, the need to reposition some investment portfolios.

“[Higher rates] will cause some disruption to asset values, including in equity markets. So, you have to prepare yourself for that. We‘ve seen markets bubbling along at record levels and the question will be whether you change your portfolio. I think you will have to reposition it and to what? Well I think some more defensive kind of positions.”

While Waislitz is forecasting some slowdown for equities when interest rates rise, he remains bullish about the long-term outlook for technology shares – even if there are currently aggressive valuations for many stocks in the sector.

“My view on the tech sector is those companies that are genuinely creating efficiencies and improvement will continue to perform through the cycle. They may go down a little bit but they‘ll come back and I would look at that as a buying opportunity [if their share prices do go down].

“I think you have to make sure you go back to the quality and the reason you‘re holding particular positions. So we are doing a fair bit of analysis of the portfolio with that thinking cap on and seeing what changes we have to make and making a call on how fast we have to do that. We’re already engaged in that process.

Technology is a part of the market that Waislitz has done very well in with nine of its listed holdings doubling in value in the past year, but also by targeting pre-IPO investments predominantly via one of his listed investment companies, Thorney Technologies.

Waislitz has high hopes for a trio of pre-IPO investments that he says should have big floats within about the next year, including the AP Ventures investment vehicle backed by billionaire Afterpay co-founder duo Anthony Eisen and Nick Molnar.

Another is eToro, the Israeli foreign exchange and contracts-for-difference broker and Wallabies sponsor set to go public via a merger with special purpose acquisitions company FinTech Acquisition Corp V in a $US10.4bn deal and list on the Nasdaq.

Waislitz has done well on both investments via his private Thorney and the Thorney Technologies LIC, as is the case with probably his biggest holding in US-based moving home app Updater.

Somewhat controversially, Updater privatised and delisted from the ASX in 2018 when it had market capitalisation of about $680m to seek a better valuation on US private markets.

Waislitz now believes it is about to achieve a $1bn “unicorn” listing as the US economy opens up again post the peak of Covid lockdowns and people once again start moving around the country.

Then there is an investment in crypto miner Iris Energy, which builds and operates Bitcoin mining centres. We think they will also have a liquidity event in the next six or 12 months and so I think we‘re going do pretty well from our investment in this company,” Waislitz says. “Their rate of potential growth is just awesome.”

But Waislitz admits the performance of his LICs needs to be better, especially the older Thorney Opportunities that continues to trade well below the value of its net tangible assets since it was founded in 2014.

It is the sort of company that renowned investor Geoff Wilson said he would target with his new WAM Strategic Value vehicle that is hunting underperforming LICs.

Waislitz said he understands and even welcomes Wilson’s interest given his long-time friend is after “assets trading at 80c that are worth $1”.

He also says he has to take a leaf out of Wilson’s book and better promote the strength of the investments the Thorney LICs have made and work harder to market them to prospective investors, as Wilson has done for more than two decades.

“I think probably the mistake we made was being patient and just saying well, why wouldn’t $1 worth of assets not trade at $1, for example,” Waislitz says.

“And what we learned from Geoff is to do your marketing very well. Geoff has a lot of people within the Wilson stable that concentrate on investor relations, marketing, promotion, or everything within that umbrella. We haven‘t done enough of that and we’ve probably been too patient and just think that should be self-evident. But clearly we have to do more.

“We have to tell the narrative better, we have to explain with more transparency why we‘re holding positions. We have to be very much more active and better at what we explain as to why we’re doing certain things.