There are currently a number of common beliefs that characterise the prevailing investment environment.<\/p>\n
According to PSG Asset Management, mispricing in assets has crept into the market especially in the last couple of years – people are overpaying for quality and certainty.<\/p>\n
\u201cBecause global growth has been low there is excess capacity in the system and because of that the conventional view is that global inflation and interest rates are going to stay low forever,\u201d said Philipp W\u00f6rz, a fund manager at PSG Asset Management.<\/p>\n
While markets are efficient at pricing in information in the short term, they also tend to extrapolate the recent past well into the future, even though investments professionals agree that predicting the future is impossible.<\/p>\n
\u201cMarkets are made up of people, and it\u2019s human nature to act irrationally and to be more comfortable following the herd, particularly when it comes to investments,\u201d W\u00f6rz said.<\/p>\n
As a result of this an enormous mispricing in assets has crept into the market especially in the last couple of years.\u00a0 \u201cPeople are overpaying for quality and certainty.\u201d\u00a0 Inevitably this leads to the prices of less favoured stocks coming down in relation to their underlying values. \u201cWe are now seeing a wide divergence between the valuations of cheap vs<\/em>. expensive global equities \u2013 in many cases as wide as during the tech bubble at the turn of the 21st century,\u201d he said.<\/p>\n Conversely, the performance of \u201creal\u201d assets (such as commodities, infrastructure assets and value stocks), as opposed to \u201cfinancial\u201d assets (such as large cap blue chips and developed market government bonds), is at generational lows.<\/p>\n To value managers such as PSG, these conditions spell opportunity, and they are finding some good buys in high quality global cyclical companies and global banks.<\/p>\n \u201cA number of global banks have solid balance sheets, are trading on attractive price to book valuations and are being priced for a continuation of the headwinds they have faced since the financial crisis of 2008.\u201d<\/p>\n Overall, W\u00f6rz said there is currently a strong case to be made for investing globally. \u201cMany quality global assets which have been through hard times over the past few years can be acquired at below average prices.<\/p>\n While most investors lack the knowledge and resources to pick out global stocks to invest in, they can invest in unit trusts with significant global exposure. These include global flexible funds which according the Association for Savings and Investments (ASISA) can be fully invested offshore.<\/p>\n