Magellan and Platinum: 10 years from now this is how the investing world has changed
A lot can change in 10 years. 10 years ago, the world was on its way out of The Great Recession, Donald Trump was just a wealth reality TV star, PetroChina was the largest company globally, and Facebook was just a website for teenagers. In 2029, the world will undoubtedly look very different from today, which is the topic of this discussion. It features two of Australia's most accomplished investors; Hamish Douglass, Chief Investment Officer at Magellan Asset Management, and Andrew Clifford, Chief Investment Officer at Platinum Asset Management.
A new paradigm of low interest rates
Despite acknowledging the danger in such a statement, Douglass said that we face “a new paradigm” in this world of low interest rates. Warren Buffett calls interest rates the gravity of markets – as interest rates go down, stock prices go up, and vice versa. Douglass offers a hypothetical example of a company growing at four percent p.a., which might be worth around 17x free cashflow with interest rates at five percent. This same equity, with rates at three percent, would be worth as much as 33 times free cashflow.
What ever happened to 'The Asian Century'?
A decade ago, the prevailing wisdom said that the US' era of dominance was over, and China was the place to invest. US markets have significantly outperformed Chinese markets since then. So, what happened?
So, what do they like?
Douglass is a big fan of the demographics in China. With more than 600m people still living in rural areas, there's still plenty of room for urbanisation. It's not just those moving from rural to cities though; over the next decade, the middle class is set to double, the affluent middle class is set to quadruple, while the affluent class is set to increase by six times.
Watch the full video below for more detail on all these points.