With government bond yields starting to enter negative territory, Platinum Asset Management boss Kerr Neilson recommends focusing on real assets like shares and property.
Mr Neilson said institutional investors are increasingly moving away from equities in favour of the bond market.
“If you look at the world today, what we’re aware of is if you look at the pension funds and life companies in Europe and America, they are reducing their exposure to equities,” he said.
“It is happening among some private investors too and they are going into bonds.”
However, he said recent examples of ‘negative bonds’ in Europe were a red flag for investors.
“We’re the first to acknowledge that the world is not perfect, but the notion that there are owners of $4 trillion of bonds that are giving negative returns or yields fills us with horror,” he said.
“I suggest to you we’re in a world where they’re printing money and trying to break the true value of fiat currency, of the stuff we exchange every day.”
Mr Neilson suggested the value of paper money was being “debased” and recommended investors focus instead on other asset classes.
“I suggest you need to own real assets, be it property, be it shares,” he said.
“You do not want to be in paper assets. And shares are not paper assets because shares are backed by real activity.”
In addition, he warned investors against relying on government regulation to stabilise the market.
“Governments are there to regulate and they are needed to regulate. My problem is that we all feel we can fall back on governments, on reserve banks and printing money,” Mr Neilson said.
“I don’t know if that’s true but what I believe is if you own real assets, you have some hope of protecting yourself and your clients.”
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