A note to clients from fund manager Philip Parker last week sent shockwaves through the Australian share market.

This was no ordinary investor update. Instead, the chairman and chief investment officer of Altair Asset Management told clients he was liquidating the Altair Australian shares fund and handing hundreds of millions of dollars in cash back to his clients.

Parker believes it is too risky to be invested in the Australian share market at the moment.

He cites concerns that China's overheated property sector and escalating debt levels will blow up later this year; geopolitical risks, including an unpredictable US political environment; and high valuations of the Australian stock market.

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But the biggest risk to Australian shares is the property market. It seems he is concerned that any property downturn could spill over into other assets.

In his note to clients, Parker wrote: "There are just too many risks at present, and I cannot justify charging our clients fees when there are so many early warning lead indicators of clear and present danger in property and equity markets now.

"Lack of upside in our models of course leaves an active manager little alternatives but to hand back cash at such an overvalued and dangerous time in this cycle."

Parker's move was unprecedented and left the rest of the funds management sector stunned.

It is extremely rare to see a fund handing back cash in Australia, though it has happened once or twice overseas.

If fund managers are concerned about a market, they will usually adjust their weightings.

They might hold fewer shares and increase their holdings in cash or bonds; or they might sell out of a particular market sector, such as retail or financials, and buy other stocks instead.

In fact, several fund managers have recently increased their cash holdings, in a sign that they are also preparing for a downturn.

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The ASX-200 has risen from the post-GFC lows of around 3150 in 2009 to close to 6000, thanks more to low interest rates and cost cutting by companies than to strong economic fundamentals.

And official data this week is expected to show Australia's economy grew just 0.1 per cent in the second quarter of this year, with a chance that the economy might actually have contracted.

Hence fund managers are doing some tweaking.

But winding up and handing back cash? Never.

Parker copped a lot of criticism from other fund managers and commentators, who said the job of fund managers is to make money for their clients.

One commentator described the move as "an abrogation of responsibility" and said fund managers should be there for their clients in good times and bad and it is up to the client to decide if and when to sell, not the fund managers.

The criticism of Parker relies on the view that fund managers will always be able to make money for their clients, or at least that fund mangers believe they can keep generating returns for their clients.

In many ways this is probably true.

Investing millions of dollars on other people's behalf requires a lot of self-belief, something which most male fund managers have no shortage of.

It also requires a lot of optimism. Even if the outlook is poor, most fund managers believe they will be able to sift through the market to find shares with upside.

There is, of course, also the matter of fees.

Fund managers traditionally charge 2 per cent of funds under management and 20 per cent of any gains.

While it is only a small percentage, when they are managing hundreds of millions or tens of billions of dollars, this can add up.

In handing back his clients' money, Parker is also handing back a lot of income.

If Parker genuinely believed that he was unable to earn a return for his clients, then he did the right thing in handing back the cash, as unusual as the move was.

In breaking away from the pack, Parker has made a brave call.

Instead of leaving funds in the market in the knowledge that despite the ups and downs the market eventually (well so far at least) rises again, Parker has had a bid on his ability to time markets.

Maybe the market will grind higher and his clients will have missed out.
But if the market does plunge as Parker expects, his clients' will have a lot of cash on hand and be able to swoop in and pick up some bargains.