European property market: business activity is slowly returning.

Specialist global equity and income fund manager, PM CAPITAL, believe that the property sector in Europe, namely Ireland and Spain, offers an attractive investment.

John Whelan, Portfolio Manager at PM CAPITAL said, the European debt crisis triggered negative market sentiment and investors viewed the European market as toxic.

“When a collapse in bank lending caused prices to fall by 50 per cent, it gave us reason to investigate the sector further,” said Whelan. “We recently visited Dublin, Madrid and Barcelona, to take a closer look at a wide range of commercial and residential properties.”

“The fall in property values was virtually ubiquitous and it was evident that prime commercial and residential real estate had over-corrected,” Whelan said.

“Rents were at significant lows with yields at their highs, resulting in asset prices down between 40-70% from their peak values.”

“The opportunity was created by a growing supply/demand imbalance, due to new construction being virtually non-existent, as developers are either bankrupt or severely constrained by the banks.”

“Spanish and Irish economies have gone through painful adjustments however and we believe that consumer confidence and business activity is slowly returning.”

“When you contrast this to the Australian real estate market where prices are on their highs, rents are on their highs, demand is stagnant and supply is increasing, investment opportunities are obviously skewed overseas.”

PM CAPITAL has acquired stakes in several newly issued real estate companies, namely Hibernia, Kennedy Wilson Europe and LAR Espana, in late 2013 and early 2014 either through their IPO’s or shortly after listing.

These new real estate companies will concentrate on buying select European commercial real estate and residential property on 8-10 per cent yields with a focus on Irish, Spanish and regional UK properties.

They are structured as REIT’s, with a payout ratio close to 100%. Hence, over time shareholders should obtain a regular income stream and capital appreciation, given the underlying assets are trading well below their new build costs. “While mainstream investors look the other way, we view this as an appealing opportunity,”  Whelan said.

“This is similar to what we saw play out in Las Vegas three to four years ago, when deeply depressed markets and assets sold well below replacement cost.”

“We initially attracted criticism when we invested at the epicentre of the US housing loan crisis in Las Vegas in 2010, however the payoffs of these positions came into fruition when the Fund generated a 63% return in the year to June 2013, versus the index at 33%.

“As long term investors we once again expect this thesis to play out over a number of years. We anticipate these positions to recalibrate and our investors should stand to benefit over time.”

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Historically low government bonds and property yields, equity prices that continue to edge higher impervious to any geopolitical news, such as the war in Crimea, and a local currency that sustains itself at high levels despite the fact that export prices have now contracted by 30 to 40%.

The charts below highlight iron ore in Australia and dairy prices in New Zealand.

Further, there is very low volatility and other risk metrics seem benign as we approach a phase of increasing long-term interest rates as QE programmes start to wind down and China enters a period of lower growth.  It appears that the monetary authorities have becalmed markets.

 CBOE Volatility Index (VIX) 2007-2014 

Despite this, there is no doubt that the tide is in fact at a turning point. The price action of different asset classes and industry sectors we have witnessed over the last few years is unlikely to be repeated going forward and will likely be very different over the next five years

This thought process is reflected in the composition of PM CAPITAL’s equity portfolios where we have sold down a number of positions over the last twelve months, with a view that opportunities to redeploy capital would be provided at some future point in time. The basic framework we employ at PM CAPTIAL has not changed, as we firmly believe that the risk reward from owning a business is far superior to that of owning government bonds, property or cash. How superior is difficult to determine because we have an abnormally low level of global interest rates, while the valuation discrepancies in Australia are limited, which combined with the elevated currency and the minimal offshore diversification by domestic investors, would favour the perusal of international equity opportunities. The investment opportunities we are finding most interesting in global markets at present is the evolving recovery in property prices that were disseminated by the Global Financial Crisis, originally in Las Vegas, but recently we have also made investments in Ireland and Spain. There is no doubt that valuations have in fact recovered, however they are still operating under industry conditions that are well below normalised levels and there is a strong prospect of solid earnings growth looking forward, which will drive further valuation expansion. The US housing market has recovered, yet yearly sales are still at least a third below normalised trends. Spain and Ireland are additional examples of the further recovery in property prices. Ireland bore their medicine early and is further advanced in the process, but what we have seen over the last 12 months is a decent recovery in rental levels– office rentals and housing prices in Ireland. A considerable amount of foreign money is streaming into the market and prices are beginning to bid up. Spain is lagging in the process, yet we expect since bottoming late last year, combined with considerable foreign capital starting to flow in, arbitrage opportunities are emerging.

We are also attracted to a number of consumer branded companies, Google, Heineken and Anheuser however price action has not afforded us the opportunity to add to this mix, yet we believe if we are patient some of the businesses we are finding will experience headwinds in terms of near term earnings, and that will create some short term disappointment, which investors will be able to take advantage of.

By Paul Moore, Chief Investment Officer, PM CAPITAL

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Lonsec said its ratings upgrade reflects its increased confidence in PM Capital’s approach:  “Lonsec has been impressed the underlying consistency of the PM philosophy and the conviction of the investment views.”

“The fund’s contrarian style often sees PM CAPITAL investigating companies that have fallen out of favour with the broader market on the premise that negative factors are often short term and a company’s value will be restored in time.”

Lonsec notes that Paul Moore, PM CAPITAL’s Chief Investment Officer, is a highly experienced and seasoned investor and believes that his approach to funds management has been consistent over his long career. Included in the Lonsec report are the following observations:

“Lonsec considers PM Capital’s alignment of interest with investors is high… There is a strong culture of ‘eating your own cooking’ and staff investment in strategies… a significant portion of PM Capital’s retained earnings are also invested in the firm’s funds – adding to incentives to preserve capital”

PM CAPITAL’s CEO, Chris Donohoe said that “the return to recommended status is a reflection of both strong fund performance and corporate changes. These include a repurchase of non-working staff shares and a wider allocation of staff shares, lower fees and tightening risk management and portfolio guidelines. “

Donohoe said “over the last six months PM CAPITAL has raised $230M in two offshore equity LICs and our offshore equity FUM will move beyond $1Bn in August. The growth in demand for global equities is logical and ultimately based off the view that compared to the local market there is a greater breadth of opportunity, a better risk reward and all at a time when the currency is in the top quartile – it just makes sense”.

PM CAPITAL Absolute Performance Fund has achieved a total return of 209.4% since its inception in October 1998, which compares favourably against the MSCI World Index (Net Dividends Reinvested, AUD) total return of 46.9% (as at 30 November 2013). The Fund has returned 19.4% per annum over the previous 3 years.

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PM CAPITAL has raised $225 million across two IPO’s since November 2013. The second IPO was targeted at investors looking for specific global exposure in the Asian region, and raised $54 million across 1,325 investors, varying in size.

Chairman of the PAF, Brett Spork, said the listing is reflective of a growing investor appetite for Australian investors wanting to diversify offshore and further recognising that Australian stocks which previously exposed investors to the Asian growth story, may no longer be a viable proxy.

“Investors are realising that in order to get exposure to Asia, they need to look beyond BHP and RIO, and really exploit where the growth opportunities in the Asian Pacific region will be over the next decade- the 4 billion evolving consumers who are growing in affluence”.

Chris Donohoe, CEO of PM CAPITAL, said the global LICs were attractive as the consensus from brokers was that the LIC structure appealed to SMSF investors, who require greater diversification to offshore equities.
“While there are numerous competing Australian LICs, the number of globally focused LICs is minimal, and the timing was ideal with the Australian dollar at elevated levels”.

Donohoe thanked the brokers involved in the raising, who contributed to the majority of the capital raised.
“We specifically thank Ord Minnett, Taylor Collison, CBA Equities and Morgans for their support of helping raise $54,203,942 across 1,325 shareholders. The stapled price of combined Shares and Options commenced trading today at $1.06”.

“While we had almost 500 financial planners across the country attend our roadshow, the vast majority of the capital raised came form the brokers. We expect planners to access the opportunity through their more traditional methods, which is why we have the products available on major platforms like Colonial First State and Macquarie Wrap”.

PM CAPITAL is a Sydney based specialist equity and income fund manager that was founded in 1998 and manages $1.7 billion in funds under management (as at 30 April 2014). The firm is owner-operated and has a long-term track record of managing equity portfolios. The investment process is a research-intensive, bottom-up approach that results in the portfolio holding high conviction positions in companies that are assessed to be trading below their long term intrinsic value.

The Company’s proposed investment mandate has been based on the guidelines of the PM CAPITAL Emerging Asia Fund (EAF), which has achieved a total return of 188.9%, since its inception in 2008, which compares favourably against the MSCI Asia (ex Japan) Equity Index (Net Dividends Reinvested, AUD) total return of 16.6% (as at 30 April 2014).

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Kevin Bertoli

PM CAPITAL has said that at times of geo-political or environmental disruption it is common for investors and markets to over-react and retreat from conviction positions or abandon a logical investment strategy.

According to the Portfolio Manager of PM CAPITAL’s Emerging Asia Fund, Kevin Bertoli, investors need to look beyond the headlines and daily events and follow a well thought out strategy. Mr Bertoli said analysis of disruptions shows that for the most part, they are short lived, and that short-term events should not cause major concern for long-term objectives.

“The daily news headlines out of China regarding its economic data, or the potential problems in the banking sectors create fear and uncertainty for investors. Geo-political tensions arising from issues like we are seeing in the Ukraine also fall into the same category.”

“However, during such times it pays to hold your nerve and remain focused on longer term outcomes.  This is particularly the case when it comes to emerging markets.”

Mr Bertoli said the reality is that the share market is far more volatile than the underlying businesses it represents, and this is more prevalent in times of crisis.

“Anxiety around geo-political issues will always have a short term impact on the market. However, history shows us that the underlying earnings power of the businesses the market represents, for the most part, are relatively unaffected by these events. The herd mentality of the market has a way of pricing near term events as if they are permanent in nature.”

“The cost of decisions influenced by short term global events can be large if it means an investors sells up or fails to go ahead with a logical strategy of investing based on the quality of the underlying businesses. In fact it is these occasions that investors can actually take advantage of the market underpricing quality companies, and can use this volatility to buy businesses at a discount to intrinsic value.”

“If you have a longer term investment time horizon, events which only impact markets for a temporary time should not sway investment decisions. Investors need to look down the road, and understand that the earnings growth potential of these businesses over the next three to five years is what will drive real share price appreciation.”

Mr Bertoli said the Asian market in particular is very volatile and sensitive to macro events.

“Near term economic data in China has the potential to disappoint. However, if you look deeper and understand the factors driving each individual business it highlights that there are sectors of the economy that are still growing. Consumer spending remains healthy and there are quality businesses driven by this long term positive trend in spending that we want to be long term owners of. It is this growth story we want to exploit over the long term. Geo-politic disruptions will not change this view.”

“At the same time, the financial markets in many Asian economies are under-researched compared to markets in the west and can represent excellent buying opportunities for those investors willing to take a bottom-up approach, which is exactly the PM CAPITAL formula for analysing and investing.”

According to its latest report, this formula has seen the PM CAPITAL Emerging Asia Fund deliver a total return, since inception in 2008, of more than 190%, outstripping its benchmark by more than 170%.

“Look for underlying trends and long-term structural opportunities, such as the rapid rise in consumer consumption in Asia and take a bottom-up approach to access superior risk reward situations that are not widely on offer in Australia, which will also help portfolio diversification.”  Mr Bertoli said.

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Look beyond Chine for opportunities: PM CAPITAL

PM CAPITAL has said that the majority of the Australian equity market appears to be fully valued, and with the growth forecast in China likely to decline, investors need to look beyond the generalised macroeconomic thematics (which tend to dominate peoples thinking) as they consider regional investment opportunities.  After consistently posting market leading annual returns since the Fund’s inception, the investment manager of the PM CAPITAL Emerging Asia Fund has said regional investors require a targeted, bottom up approach.

PM CAPITAL’s Kevin Bertoli said the investment team remains wary of risks to China’s growth outlook.

“Within our Asian Fund, exposure to the gaming and internet search/portal themes, with exposure to Malaysia, Philippines, Singapore as well as China, continue to drive our performance as did underweight positions in financials and commodities,” he said. “We see the biggest risk in Asia being China growth related and will remain cautious and selective as this slowdown reverberates around the region, given its importance to most of the neighbouring economies.”

“Our method is a research intensive bottom-up approach and despite the lower growth forecast, we are finding genuine value  in industries that are supported by rising domestic consumption or that are benefiting from changes to consumer consumption patterns. These structural growth stories coupled with sound business fundamentals, which are not largely impacted by the macro-economic environment, are our main target,” Mr Bertoli said.

PM CAPITAL’s sector leading Emerging Asia Fund recently posted another strong result in the last twelve months, recording a 45.1% return compared to the 16.8% growth in the MSCI Asia (ex Japan) benchmark.

Mr Bertoli said regional equity markets continue to be skewed to the financials and commodity sectors, which have a high presence of state owned industries. “We believe the outlook for these industries remain uncertain and do not present the best investment opportunities.”

“Currently only approximately 38 percent of the fund’s capital is invested in businesses operating primarily in China, with the balance allocated to companies focused outside of this, particular South East Asia as well as globally and cash,” said Mr Bertoli.

The one investment made during the last quarter was Malaysia based brewer Guinness Anchor Bhd, which is controlled by Heineken, whilst positions in China Resources Enterprise and PT Tower Bersama Infrastructure were closed out after reaching recent highs and internal target prices.

“We remain concerned about the sustainability of Chinese growth in the short to medium term and deliberately seek investment opportunity beyond China.”

The result continues the stellar performance run of the Fund, which has averaged a return of 21.9% per annum since inception in 2008, the corresponding benchmark return (MSCI ASIA ex Japan index) was 3.6%. The Fund has also generated a total return since in inception of 197.8%, outstripping the relevant benchmark many times (21.4% comparative benchmark return). The results are particularly notable given over the last six months the Fund has remained, on average, less than 80% invested.

PM CAPITAL believe the Australian dollar is over valued and results for this quarter were aided by a depreciation of more than 4% in the Australian dollar and the funds un-hedged currency position.

Fund positions

Investments in internet franchises form the largest single allocation of funds (35%) with positions in the Malaysian based iProperty Group, which has a similar business model to realestate.com.au and operates leading search sites across the region; Jobstreet, a SEEK-style online jobs business with a strong presence in Malaysia, Singapore and the Philippines, in which Seek has a 22% stake; and Baidu, a China-only internet search provider with 70-80% industry revenue share, whose position has been further strengthened by the departure of Google from the Chinese market.

“Gaming holdings were the largest contributor to the December results with ASX listed Donaco International, purchased in the September quarter, appreciating in value by more than 100% after receiving its gaming table allocation and a 30 year licence for its Casino in Vietnam adjacent to the Chinese border.”

“The PM CAPITAL investment style for the Emerging Asia Fund is a contrarian, high conviction one where investments are purchased on the merits of their risk reward characteristics, which typically reduces the investible universe to 15-20% of the market. It is a bottom up approach which also explains why our fund is likely to significantly differ in composition from a benchmark focused fund,” Mr. Bertoli said.

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PM CAPITAL will launch a listed investment fund.

Sydney-based specialist equity fund manager, PM CAPITAL, yesterday said that following strong demand from investors, it will launch a listed investment fund (LIC); the PM Capital Global Opportunities Fund Limited.

CEO of PM CAPITAL, Chris Donohoe, said access to global shares is limited for investors wanting to access the market via the Australian Stock Exchange (ASX), although demand in the space is on the rise.

“Based on our observations of investment markets, we believe that now is an excellent time to offer this global equity company to investors.”

“Cash and bonds are trading at historically low yields and do not compare to the relative earnings yield of companies.”

“Within equities markets we believe global markets provide a superior risk/reward opportunity. With moderation in China’s demand for commodities, some Australian companies trading at significant premiums to their global peers and with the prospect of a falling Australian dollar, we believe that the outlook for global equity returns in Australian dollar terms is attractive, especially relative to other investment opportunities available to Australian-based investors.”

Mr Donohoe said many investors’ portfolios were underweight global shares, even though they understood the benefits of international equities.

“With only a handful of ASX-listed global equity managers currently available, we believe this well-timed opportunity will appeal to those investors looking to increase their exposure to global equities.”

“Most investors are aware that offshore markets offer a far greater breadth of opportunity that cannot be found in Australia.   However, the familiarity with Australian shares, means investors remain underweight global equities.   Our LIC will give investors access to quality global businesses via an experienced investment team focused on maximising the long term after tax value of investors’ capital.”

“There are only a small number of global LICs in Australia, with the majority of assets trading at a significant premium.  We therefore believe that this IPO will attract good interest.”

PM CAPITAL has appointed Ord Minnett to act as arranger and joint lead manager in a pre-capital raising roadshow. RBS Morgans, Bell Potter and Taylor Collison have been appointed as the other joint lead managers.

As at 30 September 2013, the Fund had achieved a 12 month return after fees of 54.2%; a 20.5% excess return compared to benchmark, the MSCI Global Equity index. The Fund has achieved a 190.7% total return after fees since inception in October 1998 compared to the 29.3% return of the index over the same period.

PM CAPITAL is a Sydney based equity and income fund manager who manages in excess in A$1.5 Billion in funds on behalf of private clients, the clients of financial advisers and institutional investors.

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Potential problems for ETF’s in emerging markets.

Sydney-based specialist equity fund manager, PM CAPITAL, yesterday warned that investment into Emerging Asia ETFs is a dangerous strategy because the instruments are heavily skewed to businesses that are at the mercy of the macro environment and dominated by questionable state-owned enterprises (SOEs).

Kevin Bertoli, portfolio manager for the PM CAPITAL Emerging Asia Fund, said although the timing is uncertain, when the cracks in emerging economies proliferate, it would cause serious problems for ETF’s.

“Emerging markets are typically dominated by businesses that have a high degree of uncertainty, such as those driven by the macro environment or businesses of lower quality with no long term sustainable advantage.  Additionally, the recognition by the Chinese banking system of deteriorating asset quality and liquidity tightening could prolong this year’s disappointing results.”

Mr Bertoli said the equivocal outlook for the region highlighted the importance of active management and a maintaining a high degree of conviction in investment decisions.

“A large portion of the market is investing solely for broad base thematic reasons, such as the rise of China. These investors will typically buy the market as opposed to diving deeply into the underlying stocks, and this can be seen in the rise of ETF’s in the region over the last decade.  However, these investors typically have a low level of confidence in the underlying earnings power of the investment, so when sentiment turns they tend not to differentiate between good and bad businesses. This mentality creates the opportunity to invest in the 10 to 15 per cent of the market that represents good value.

Mr Bertoli said the dominance of state-owned enterprises (SOE) could also create problems for ETF investors.

“On top of the widely know issues surrounding transparency, SOEs ultimately act as leavers for their majority government shareholders to grow the economy. This often results in management being little more than ‘yes men’ who often make irrational investment decisions for the benefit of the country as a whole, rather than in the interests of shareholders.

“Additionally, long term success in China requires the economy to transition to one driven by the public sector; this is going to have a negative impact on SEOs.   Around 43 per cent of China’s total industrial and business profit comes from SOEs, which have showed significant growth reductions over the past twelve months.”

In the first quarter of 2013, SOEs reported 5.3 per cent growth, compared with 2012’s first quarter growth figure of 7.7 per cent*.

“For this reason, we cannot stress the importance of investing from the bottom up, based on fundamentals and in genuine businesses where the valuation displays a meaningful dislocation from its share price.   Investors should also not be investing for investing sake, or for fear of underperforming if you miss a market rally. But with market volatility on the increase, we believe there is ample opportunity for us to deploy our strategy and take advantage of the market mispricing.”

PM CAPITAL’s Emerging Asia Fund delivered 35.0% for the financial year and a five year annualised return of 19.3% (the Fund’s inception date) – the strongest performing Emerging Asia Fund recorded by Morningstar.  This lies in stark contrast to the iShares MSCI Emerging Markets ETF return of 14.3% return for the 2013 financial year (-0.2% 5 year annualised return).

PM CAPITAL adopts a concentrated approach to investing where underlying portfolio holdings are driven by bottom up stock specific stories and not broad based macro themes. The Emerging Asia Fund is ideally looking for opportunities that are being driven by underlying structural dynamics, which have been seen to play out in other parts of the world and can easily be repeated. The Fund is not investing in exotic Asian companies, instead they are simple businesses similar to Australian businesses such as Seek Ltd., Woolworths or Asciano.

*Source Xinhau

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Simon Rutherford

Sydney-based specialist equity fund manager, PM CAPITAL, has enhanced its senior investment advisory team with the appointment of a new long-only, Australian Shares Manager, Simon Rutherfurd.

With more than 22 years’ experience in funds management, Mr Rutherfurd’s career comprises senior roles at IAG Asset Management, Prudential Portfolio Managers Australia, ANZ Funds Management, BT Alex Brown and most recently at Northward Capital; covering stocks in the transport, healthcare, materials and media sectors.

Paul Moore, Chief Investment Officer of PM CAPITAL, said Mr Rutherfurd’s impressive track record and strong cultural alignment would assist the team in unlocking value in equities markets.

“For the 2012/13 financial year, the PM CAPITAL Australian Opportunities Fund delivered a 30.1% return, which marks the fifth year in a row that the Fund has met or beaten the index.

Our returns are a direct result of the dogmatic adherence to our long standing investment philosophy and process of buying a quality business at the time it is unloved by the market.” he said.

Mr Moore said taking this contrarian approach requires courage and conviction, particularly when the market is consumed with short term macro noise and the fear of being seen to be different from the rest of the crowd.

“The investment world can be a lonely place when your ideas are not consensus thinking. But the willingness to back our judgment and open ourselves up to the criticism of others, is what has allowed us to produce a return since inception of 290% versus a benchmark return of 171%.

“The reality of the investment world is that we do not know what lies ahead in terms of risk and opportunity. However, what I can tell you with certainty is the underlying philosophy that guides our investments will never change.”

In terms of current market opportunities, Mr Moore said he believes financial stocks have approached fair value and resources, although may rally in the short term, are not the place for long term capital appreciation.

“Our focus remains on the other 40 per cent of the market. It’s worth noting that while the ASX200 gained 23 per cent over the past year, the Small Ords actually lost five per cent, highlighting the divergent returns that can exist within the Australian market.

“The Australian Opportunities Fund has the flexibility to scour the entire market in the hunt for compelling investments, without being limited to a particular size, style, or sector bias, and with this flexibility we are continuing to find new stocks in which to invest. Simon’s experience and expertise is ideally suited to uncovering value in the Australian market and we welcome him to the team.”

The Australian Opportunities Fund’s objective it to provide long term capital growth via a concentrated portfolio of Australian securities. The Fund presents a true alternative to

Australian equities and achieves this through a contrarian, benchmark unaware approach to investing. The focused portfolio is comprised of approximately 15 to 25 stock specific ideas, which are subject to intensive research and peer group review. Stocks are selected on a risk reward basis where the objective is to maximize investors’ capital over the long term.

Mr Rutherfurd said; “For me, the key to long-term investing remains bottom-up stock picking, capital preservation and avoiding sectors that are experiencing long-term downtrends. Over many market cycles the focus always remains to own stocks with solid prospects, sound fundamentals and good management. Currently there a number of attractive local investment opportunities and I look forward to working with the team to introduce these to our investors.”

Simon Rutherfurd has an MA in English, MBA in Finance and is a qualified chartered accountant.

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Paul Moore, Chief Investment Officer of PM Capital, said that following their recent strong results, Australian banks are now trading on a hard to justify valuations and operational metrics when compared to their historical valuation and those of their international peers.

“There is no doubt that Australian banks are great businesses; they are a guaranteed oligopoly, they all produce the same product at the same price and if they were to ever get into trouble, the government is guaranteed to bail them out. That being said, they are well priced for that now and we don’t believe this is the place for new investment.”

Mr Moore said current valuations were not factoring in the significant risk of the Australian mortgage market.

“Because of the way risk rating works in the global capital system, home loans are seen as risk-free, so can be held in great quantities on the balance sheet. In terms of gross loans to equity, Australian banks are sitting at up to 8.4 times. The perception of home loans is that they are not problematic, but the reality is if we ever had an environment where home prices were to decline 20-30% on a permanent basis, there would be a significant issue.

“The sizable amount of leverage on the balance sheet from these loans would cause serious distress. Further to this point, there is an anomaly in Australia; the bank with the highest leverage has the highest P/E ratio.   This highlights that people are forgetting how balance sheets work and assuming home loans will be fine forever, which is exactly what happened in 2008 in the US, and look how that turned out.”

Looking offshore, Uday Cheruvu, PM Capital banking analyst, said the outlook for growth in US financials was superior to that of the Australian market.

“The S&P banking index is trading around a 50 per cent lag to the pre GFC peak of 115.  In contrast, the S&P 500 index is trading at the same level as the pre-GFC peak, 1500 versus 1500,” he said.

“We are also seeing economic fundamentals recover. Consumer borrowing growth has turned positive in the US, housing prices are the lowest they’ve been since 1987, whilst debt service levels are the best they’ve been since 1994.   The GFC brought significant consolidation and decreased competition in the banking sector, while US bank margins are almost double that of Australian banks.”

Mr Moore said that while offshore markets presented some strong opportunities, investors also needed to tolerate a level of risk.

“I would also remind investors that returns do not come without volatility, but that the stock market is far more volatile than the underlying businesses it represents.  In the last twelve months there have been two market corrections of approximately seven to nine per cent.  To us these represented good buying opportunities. PM Capital will continue to seek a good collection of businesses to own, which over the longer term, should deliver solid returns for our investors.”

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