Speaking at the Association of Financial Advisers conference at the Gold Coast this week, Altrinsic's Rich McCormick said that an unwinding of quantitative easing (QE) and rising interest rates would be "very negative" for the major Australian banks.
Australian banks are currently trading at all-time high valuations, and offer a "very attractive dividend yield relative to interest rates", he said.
But that will quickly change if the US Federal Reserve begins to taper its QE program and Europe does the same, said Mr McCormick.
"[Investors will] be much less interested in buying a four or five per cent dividend yield if interest rates are at four, five or six per cent," he said.
In addition, there is an "incredibly high" correlation between the change in bond yields and the change in bank valuations, said Mr McCormick.
Despite the investment community being "very excited about the dividend play", Altrinsic is not willing to pay the current valuation for it, he said.
As for the rest of the fund manager's portfolio, Altrinsic is "significantly underweight in US" given the current high valuations – although the manager is seeing some value emerge in Europe.
"We continue to be very much overweight Europe … especially healthcare and consumer multinationals, which also offer interesting emerging market franchises," said Mr McCormick.
