by James Thomson

Fund manager Geoff Wilson has vowed to continue the fight against Labor’s franking credit policy if the ALP wins Saturday’s federal election, hoping the Senate will block or at least amend the plan. The founder of Wilson Asset Management pointed to comments from Centre Alliance’s senator Rex Patrick that he could support compromise on the policy, which would see hundreds of thousands of self-funded retirees lose cash refunds for franking credits.

Senator Patrick, who previously indicated his party would block the policy,  said he could support the franking policy if Labor grandfathered the change or introduced a cap on the refunds a retiree could claim.

Mr Wilson said these moves “may limit some of the collateral damage” caused by the abolition of refunds to zero taxpayers, but he still believed it should be blocked in the Senate.

“After today’s comments, our focus will be to communicate with the Centre Alliance,” he said.

“To me the principle is inequity,” he said on the sidelines of Wilson Asset Management’s quarterly shareholder briefing in Melbourne, which was attended by about 800 investors.
“We are standing up for people’s livelihoods here, and they are people who have supported us. So it’s incredibly important that we support them.”

A survey of just over 3000 people conducted by WAM found the majority of respondents believed they would lose between $5000 and $10,000 if the Labor policy were introduced. Of the 16 per cent of respondents who said they customarily voted Labor, almost three-quarters said they did not plan to vote for the party at this election, and half expected their children to change their vote also.

Share prices

Mr Wilson said he had achieved his goal of making franking a central part of the election debate. “We’ve got 80,000 shareholders and we think most of them will be impacted by this. We were driven by standing up for them and to make sure it was on the public agenda. Have we achieved that? I think we have,” he said.

Mr Wilson also told shareholders he believed the franking issue had weighed on the share prices of listed investment companies across the market, including the six that are run under the WAM banner. He said if Labor won, a compromise deal in the Senate could help lift that cloud.

He also revealed that the WAM companies had missed out on the early stages of the 2019 rally after moving heavily into cash following the meltdown in global equities late last year.

The sudden change of direction from the US Federal Reserve – which went from quantitative tightening and raising rates in December 2018 to quantitative easing and a holding rates steady in February – had caught WAM by surprise.

“We were set up for higher interest rates, quantitative tightening and slower earnings growth from a slower economy. And the Fed effectively took two off the table. It was a phenomenal about-face,” Mr Wilson said.

But he said he was comfortable with the decision to increase cash levels in a time of crisis, arguing capital preservation was a key part of WAM’s mission.

Mr Wilson said China’s efforts to stimulate the economy left him confident the bull market could run a bit further, even with trade tensions rising.

“Even though we are long in the tooth for a bull market, it looks as though it is going to continue for a period of time,” he said.

But he also warned his team was seeing excesses in some areas of the market. In the past month, capital raisings for smaller companies had been heavily subscribed despite elevated valuations placed on these businesses. “We get a fraction of what we bid for,” Mr Wilson said.

Local tech stocks were also trading at valuations not seen since before the tech wreck of 2000, he said.

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