Investors should avoid bank stocks in their portfolios because the credit cycle is going to lead to ...
Investors should avoid bank stocks in their portfolios because the credit cycle is going to lead to massive losses in the sector this year and next, and could lead to the failure of at least one major international bank, according to the latest view from Bedlam Asset Management.
Huge levels of consumer and corporate debt must be cleared before the economic cycle can pick up through rising levels of investment, but most banks seem to think that their credit risk systems will insulate them from any impact, the fund manager says.
"So far no major bank has imploded," Bedlam says.
"It only seems a matter of time. There are clear candidates in both Europe and the US. The Collapse of a bank may well be the catalyst to review our negative stance on the sector. In the meantime, for any investor focussing on absolute returns, the risks of holding banks far outweigh the rewards."
Bedlam also says it will avoid investing in UK pharmaceutical stocks because they are "grossly over-owned by other fund managers, who will be forced sellers".
Fund manager Bedlam Asset Management has waged a high-profile advertising campaign against competitors, accusing them of hiding poor management behind relative performance figures.
‘Important to have an anchor’
Lack of innovation for solutions
Some 2,000 consumers affected
Achievements, charity work and other happy snippets