Malcolm Turnbull’s not so big bank short

Prime Minister Malcolm Turnbull is investing in a fund that is betting against Australian banks at the same time a new $6.2 billion levy introduced by his government saw billions of dollars wiped from the big four’s share prices.

But his investment gain from the big slide in bank shares is likely to be minuscule – much less than $15,000 out of more than $1 million he has invested in the fund.

And while there is no suggestion Mr Turnbull acted to introduce the new levy for any financial gain it does raise concerns about perceived conflicts of interest he has as an investor in a fund that stands to gain from falling bank share prices pushed lower by the new levy and a fresh round of “bank bashing”.

The new levy has already been described as a “hate tax” by former Commonwealth Bank of Australia chief executive David Murray and has been slammed by the chief executives of all of the big four banks.

The Australian Financial Review revealed details of the levy ahead of the official budget announcement. The Australian Securities and Investments Commission chairman, Greg Medcraft, said on Wednesday that he would “hunt down” whoever leaked information.

Direct investment

According to the latest pecuniary interest statements Mr Turnbull has a direct investment in the Bronte Capital Amalthea Fund, run by the hedge fund behind the “big short” of Australian banks.

Bronte Capital, operated by former federal Treasury official John Hempton, and best known locally for its concerns about a western Sydney housing bubble, rushed to defend the Prime Minister’s financial position.

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“Malcolm owns a low, seven-digit position in our funds and I am short 30 basis points of the banks so if the banks halve he will probably make about $15,000,” Mr Hempton told AFR Weekend, “So it’s not a position for Malcolm.

“If you want to beat that story up I will mercilessly patronise you. Malcolm is long property like the rest of us Aussies.”

Mr Turnbull was unable to answer whether any of his other investment exposures could benefit from negative sentiment towards either the banks or a new tax on them as he is travelling.

He has previously told Parliament that: “I described in an earlier answer the approach that I took to managing my and Lucy’s investments in order to avoid conflicts. We took the approach of managed funds, and they were offshore managed funds, to avoid conflicts in Australia, and so I think honourable members understand that.”

Savings deposits

The Prime Minister also has savings deposits with the Commonwealth Bank, Macquarie Bank, Westpac and National Australia bank – all of whom will be restricted from reducing their rate of interest paid on deposits as a way of covering the cost of the new levy.

The big four say the new tax will cost $1.4 billion and hit profits by nearly $1 billion, after tax, a year and put dividends at risk.

When the sharemarket opened the next morning after the budget announcement, bank shares started falling. Within minutes Westpac Banking Corp had dropped more than a dollar to $33.03. Commonwealth Bank of Australia, ANZ Banking Group, National Australia Bank all dived too. Macquarie Group shares fell $2.50 to $91.76.

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