For most Australian investors the current low interest rate environment presents an unfamiliar outlook. The cash rate has just moved further into record low levels and is a symptom of chronically low growth. The challenge now for investors is to figure out how and where they can invest to earn a decent return. While the current scenario is a first in Australia, there are, however, some examples of countries that have faced extended periods of low interest rates. Jacob Mitchell, Chief Investment Officer at Antipodes Partners, spent eight years managing a portfolio that invested extensively in Japanese stocks - a country that has endured two decades or sub 1% interest rates. In this short video, Mitchell shares the key lessons he's learned on how to invest successfully in a low-growth world. Watch the video or read a transcript of the interview below.
Lessons from Japan
Japan is a market that many people have found incredibly frustrating. I think it’s because the average investor often gets caught up in the macro and misses the bottom-up opportunities. The property market peaked in Japan in 1989, so we’ve had a long time to consider Japan’s issues. I wonder, over all those years, how much mental effort has been wasted on analysing Japan from a top-down perspective versus just buying good companies at the right price?
There have been a lot of Quant studies on what’s worked in Japan and what hasn’t; GARP has worked, dividend yield has tended to work, deep value has tended to work. It’s not our style. We use Quant in a different way, it’s more about screening for anomalies and then using our understanding of industries and sectors, and that’s worked well – but that works well everywhere, not just Japan.
Japan is a great example of not getting caught up in the generalisations and instead, focussing on the industry specifics.
Transcript has been edited for clarity.