Investec’s contrarian investor Alastair Mundy says he is staying away from UK banks as there is a risk they will go bust.
Mundy, who runs the £487.7m Investec UK special situations fund, says the only bank he holds is HSBC because it has large levels of deposits with not many loans and a solid balance sheet.
Mundy says: “Banks are cheap but they could be nationalised and there is a significant risk of this happening. Banks have got value trap characteristics. They have a 50 per cent upside and a 100 per cent downside.”
He says if credit markets seize up again, there is a risk a number of banks will go bust.
Mundy, who also runs the £2bn Investec cautious managed fund, has increased Japanese equities from 3 to 8 per cent in the fund over the last 12 months.
He says: “For the last 20 years, Japanese equities rarely looked cheap and everyone has lost interest in Japan. It has problems with government debt and immigration and a lot of bad news is in the share prices.”
But Mundy says he has been adding to Japanese exporters that have the chance to benefit from a weakening yen.
He says: “I have been investing in those that are struggling due to the strong yen as the yen looks overstretched.”
Hargreaves Lansdown investment analyst Richard Troue says: “Using banks is a long-term investment theme. To trade in and out with a short-term view is very tricky.”