Platinum International has increased the level of shorting in its fund in anticipation of future market struggles.
The fund managers, Andrew Clifford and Clay Smolinski, said they had seen equities trading at high valuations and were concerned about the speculative mania in cryptocurrencies and equities targeted by social media such as GameStop.
“We must acknowledge extremely high valuations at a broad market level and a speculative mania in certain subsets. We are more active on the short side; net market exposure is trending down. In our view, it is plausible that markets as a whole will struggle to make real progress in the coming years but, within that, we expect rotations may be highly profitable,” they said.
“Events like Archegos and Greensill, are now joined by rapid sell-off in cryptocurrencies and a re-emergence of the craziness in so-called meme stock land. We cannot emphasise enough that the more we see, the more we are alert to risk.”
They also noted the market was rewarding cyclical stocks after a long trend favouring growth and defensives. New themes in the $9 billion fund included copper mines and automakers which provided exposure to the energy transition theme.
Its largest weightings were to Samsung at 3.7% and Glencore at 3.1% while its largest sector weighting was 19% to industrials.
The Platinum International fund had returned 28% over one year to 31 May, according to FE Analytics, versus returns of 24% by the global sector within the Australian Core Strategies universe.
Performance of Platinum International fund versus sector over one year to 31 May 2021