Investec’s fund manager Alastair Mundy, who runs the £487.7m Investec UK special situations fund and the £2bn Investec cautious managed fund, says he is staying away from UK banks as there is a risk they will “go bust”.
Mundy’s only bank holding is a 6.7 per cent position in HSBC within his special situations fund. He says that this is because HSBC has lots of deposits and not many loans and a solid balance sheet.
Mundy says: “Banks are cheap, but they could be nationalised. There’s 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 that if credit markets seize up again, there is a risk that banks will go bust.
In contrast to other managers, Mundy says he does not see really cheap valuations in the equity markets.
He says: “Average PEs at the moment are not great or briliant. US corporate profitability has never been higher. People have been sacked, tax and interest rates are low. Tax rates are going to go up, as are interest rates. If companies are making too much money, other companies go in and overcut them.”