Low Rates, Assets Inflate: Whitepaper Summary

Watch Andrew Macken, Montaka CIO, summarize both the parts of the whitepaper in this short videoLow interest rates have been a fact of life in large developed economies for the past decade – and counting. The prospect of sustainably low longterm “risk-free rates” of interest has driven required returns down, and boosted prices, in many financial asset classes. Yields on government and corporate bonds, and capitalization rates on real estate, have fallen. The same has not been true for the aggregate equity market…yet.

In Part I of this two-part whitepaper series, we considered the likely drivers of low interest rates that are currently being observed, particularly around demographics, indebtedness, technology, globalisation and the structure of the international monetary and financial system. We looked to Japan as an example of a major economy that may hold some lessons about the future for the rest of the world. Read Part I here.

In Part II, we consider the consequences of such a protracted low-rate environment on asset prices – in particular on equity prices. We observe that,
notwithstanding a significant recent reduction in global interest rates, the market-implied required return for equities has remained relatively stable. Consequently,
we believe the equity market offers investors attractive risk-adjusted returns on average. Finally, we consider what long run effects this low rate environment may have on our societies more broadly. Read Part II here.

You can also watch the summary video by clicking here.

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Our Montaka Global Long Only strategy strives to act as a core, high conviction, global portfolio holding. Consistent with the long portfolios in our Montaka strategies, this offering is focused on owning the world’s high quality, undervalued businesses – and cash when appropriate – to outperform its benchmark.

Our Montaka Active Extension strategy strives for maximised return over the long-term. Owning the Montaka long portfolio typically scaled up to approximately 130 percent - and the Montaka short portfolio typically scaled down to approximately 30 percent – this strategy results in a net market exposure of approximately 100 percent most of the time.

Our Montaka variable net strategy strives for significant downside protection – but with minimal upside reduction. Focused on owning the world’s great and growing businesses when they are undervalued, while managing a portfolio of short positions in businesses that are deteriorating, misperceived, and overvalued, this strategy is our flagship long-short

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Our Montgomery Global strategy strives to act as a core, high conviction, global portfolio holding. Consistent with the long portfolios in our Montaka strategies, this offering is focused on owning the world’s high quality, undervalued businesses – and cash when appropriate – to outperform its benchmark. Branded as “Montgomery Global” in Australia to reflect a key.

Our Montaka Active Extension strategy strives for maximised return over the long-term. Owning the Montaka long portfolio typically scaled up to approximately 130 percent - and the Montaka short portfolio typically scaled down to approximately 30 percent – this strategy results in a net market exposure of approximately 100 percent most of the time.

Our Montaka variable net strategy strives for significant downside protection – but with minimal upside reduction. Focused on owning the world’s great and growing businesses when they are undervalued, while managing a portfolio of short positions in businesses that are deteriorating, misperceived, and overvalued, this strategy is our flagship long-short