NEW YORK (HedgeWorld.com)–Making the case that growth stocks are coming out of their five-year doldrums relative to value stocks, Richard Driehaus pointed to the U.S. housing boom as the riskiest part of the economic landscape.
In other parts of the world, however, his investment team is identifying housing-related businesses with significant growth potential.
Driehaus Capital Management Inc., Chicago, manages mutual funds and long/short equity hedge funds totaling about US$3 billion combined assets.
Speaking at a press conference, Mr. Driehaus suggested that while the U.S. stock market may prove to be difficult for both bears and bulls, it has promising sectors such as energy and health care.
But he sees consumer and financial stocks as vulnerable because households have borrowed heavily and some 60% of bank lending capacity is in mortgages. With housing prices at record highs, the market appears to be peaking.
“With the high level of mortgage lending by banks, there could be more risk than we think,” he said.
The hazard is widespread because many recently created jobs are in the real estate sector. He regards hedge funds and derivatives as another source of financial risk today.
The United Kingdom is already showing evidence of a downturn in housing, with prices and retail sales falling. Mr. Driehaus is more positive about Germany, Japan, China and India.
The property market developing in China is creating investment opportunities. German real estate prices are not inflated and may start rising, Mr. Driehaus said. He also favors a Spanish developer that is expanding into Eastern Europe, where strong growth in housing demand is expected.
Overall, this is a good time to reallocate money to growth managers and to diversify internationally, he argued.