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In this Collection... First published on 16th May 2016
As central banks conspire to drive down interest rates, both short-term and long-term, the question of valuation becomes an increasingly difficult one. One of the key inputs to valuation is known as the ‘risk-free rate’, and is generally based on long-term bond yields. As Quantitative Easing and negative interest rates send rates close to and beyond zero, analysts and fund managers must decide whether to adjust to lower-rates or maintain the status quo. In this Collection, we asked three contributors about how low interest rates have affected their valuations and investment decisions. Responses by Chris Prunty from Ausbil, Tim Kelley from Montgomery Investment Management, and Sean Fenton from Tribeca Investment Partners.
15th May, 16
When we started the Ausbil MicroCap Fund in February 2010, we missed the bottom by about 12 months but in hindsight, it was still a fantastic time to start a smaller companies fund. Valuation multiples ranged from 8-12x PE and earnings were recovering so growth looked better than it does... Read More … Read More
15th May, 16
Interest rates represent the time value of money or the rate at which people are prepared to trade off present for future consumption. It significantly impacts the value of equities, being the present value of future cash flows. To the extent that lower bond yields represent lower inflation or weaker... Read More Interest rates represent the time value of money or the rate at which people are prepared to trade off present for future consumpt… Read More
15th May, 16
Asset price inflation has been one consequence of low-interest rates, and that is what you would expect. However, the impact of low-interest rates to long-term valuation is not as clear. In assessing value, you need to consider whether low rates will prevail for the timeframe of your valuation, which may... Read More Asset price inflation has been one consequence of low-interest rates, and that is what you would expect. However, the impact of… Read More