Regal Funds Management’s Philip King believes the bear market has a way to go despite a recent bounce in share prices, as he tips ASX companies may tap investors for $100bn, mirroring the global financial crisis raising rush.

Mr King, Regal’s investment chief, is urging investors to be patient as financial markets endure one of the sharpest sell-offs in history.

“There is still a lot of fear and uncertainty around the coronavirus,” he said in a Friday webinar for Regal’s listed RF1 fund.

“It (market sell-off) wasn’t caused by high valuations.”

The firm believes it is now well placed to navigate the turmoil after rejigging its portfolio and taking “decisive action” last month. In the March quarter, the Regal Australian Long Short Equity Fund posted a negative performance of 35.2 per cent, making it the worst long-short fund ranked by Mercer. Over five years, though, the fund is in top spot among its peers with 9.9 per cent annual performance, when tracking for excess monthly returns is included. Long-short fund is just one strategy within RF1.

The 21 per cent ASX fall in March made it the worst month for stocks since the 1987 crash.

“It’s important to be patient and wait for the bull market,” Mr King said. “There’ll be a lot of false dawns a lot of sucker rallies, such as the one we are seeing now, but I think we just need to let time pass before this bear market is over.”

Mr King expects an ongoing wave of capital raisings.

“We think something similar (to the GFC’s $100bn) could be raised over the next six months,” he said, noting that close to $10bn had already been raised by ASX companies over the past six weeks. “The big swing factor … is the banks.”

Mr King said while the GFC drop in house prices was “quite muted”, there was a risk of a medium-term sharp fall during this downturn, following the end of the federal government’s JobKeeper wage program.

“That I think could contribute to the banks eventually raising capital.”

Mr King is adamant the firm is well positioned to take advantage of opportunities that present in the current climate. “We feel like we can invest with confidence,” he said. “We haven’t seen any significant redemptions so far.”

On the corporate regulator’s investigation into the firm, Regal chief executive Brendan O’Connor said the firm was not aware of any conduct that involved “a breach of the law”.

This article was originally posted on The Australian here.

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