The ‘60s wasn’t all peace and love.
Antipodes Partners founder, Jacob Mitchell, told an Implemented Investment Solutions (IIS) roadshow crowd last week that the 1960s featured a rising tide of populism that set the stage for fiscal-fueled growth – and inflation.
Mitchell said the current outburst of global populism echoed the 1960s, which, could upend consensus views of extended low growth and inflation if governments follow the historical precedent to quash unrest with cash.
“These are very unusual times,” he said.
“None of us have lived through this sort of environment in our investing careers.”
While the standard investment narrative today plots low interest rates and subdued growth continuing for years, if not decades, Mitchell said there are “just as many convincing arguments for inflation and growth”.
For example, he said the ageing global workforce is often linked to a forecast trend of lower income and less spending in aggregate, which would keep inflation and interest rates in check.
But it could also be that businesses would have to compete harder for fewer workers, which in turn may lead to higher wages and inflation.
Likewise, Mitchell said that technological innovation could be making the global economy more productive but in ways not yet captured in statistics.
Regardless, he said equity investors would have to tread carefully in the low-rate world as “bond-like and growth” stocks in particular are hypersensitive to changes as interest rates approach zero.
“The market today is the most extreme one I have ever operated in,” Mitchell said. “There’s a bubble in duration-chasing.”
For instance, he said based on price-to-book data the technology sector today makes the late 1990s tech bubble “look like a blip”.
Mitchell, former Platinum Asset Management deputy chief investment officer, launched the Sydney-headquartered Antipodes in 2015, positioning the boutique as a “pragmatic value manager”.
Antipodes rolled out two portfolio investment entity (PIE) funds – long/short and long-only options – in NZ last year under the IIS wrapper, since attracting about $30 million. Overall, Antipodes, which operates under the ASX-listed Pinnacle Investment Management affiliate umbrella, manages about A$9.5 billion.
According to Mitchell, Antipodes is a bottom-up manager targeting stocks that offer “margin of safety” and “multiple ways of winning”. He said the process identifies “diversified alpha clusters” while incorporating both quantitative and macro-economic data.
“And we take out insurance against market extremes when it’s cheap,” Mitchell said.
He said global pension funds have created one of the biggest looming market risks after allocating a large portion of traditional fixed income portfolios to illiquid, and leveraged, alternative assets.
Share markets were also “closing to private equity and venture capital” investors that have backed the recent big technology plays, Mitchell said. As well as the cancelled WeWork IPO, he said many of the listed tech darlings had moved back sharply in price of late.
“Investors are beginning to ask whether every ‘unicorn’ is a mirage,” Mitchell said. “Disruption has been over-hyped.”
Much like the ‘60s.
The tri-city IIS roadshow – the first for the Wellington fund-hosting firm – also featured presentations from Brandywine Global, Russell Investments and APN Property.
