Generational low interest rates are symptomatic of lower growth and inflation, made acute by central banks reacting to structural factors such as ageing populations, integration of savings rich economies into the world economy, offshoring and more recently deleveraging and excess export capacity. Increasingly, there is mounting evidence that distortions are growing, even as the policy gains are diminishing. The blind assumption of unendingly low rates make markets vulnerable to a cyclical back-up in yields – a risk we believe is asymmetrically priced. Accordingly, we are avoiding the bond proxies as long investments, accumulating selective opportunities in banks, the sector that has suffered the most from yield curve compression, and increasing our shorts on the weaker versions of the bond proxies. In summary, we’re encouraged by the growing valuation dispersion within markets as we think this is indicative of broadening pragmatic value opportunities, both long and short.