[GRTV] Investing's difficult at the moment top manager says

Magellan chief investment officer Hamish Douglass speaks to Good Returns TV about how to invest in markets complicated by coronavirus, low interest rates and upcoming elections.

Monday, March 9th 2020, 8:48AM

Coronavirus isn’t a repeat of the global financial crisis, Magellan chief investment officer Hamish Douglass says, but there are other risks looming.

He said it was hard to predict what would happen with the virus but it was likely to pass like a flu season.

“And in three to six months it would have passed through many areas of the world. And therefore, I think that in the short term, we could have a lot of volatility in markets, but this isn't 2008. This isn't a financial crisis. And I think if there's a lot of volatility, it's not the time to panic.”

But he said he was concerned that investors were taking more risk to seek better yield in a low-interest rate environment.

“It's inevitable. It always happens. The question you have to ask yourself ... a number of questions. Are they moving into areas that are at a great enough scale that when eventually some of those bubbles burst, and you will get bubbles, are they going to be systemic and cause major economic implications there?

“A lot of people think that they can get out of the way here. They say, 'I know it's happening, but their central banks are all cutting rates. They're likely to cut them further here at the moment'.

“And to me it's a little bit like people being Cinderella at the ball. All thinking: 'Look, I kind of know there's a bit of risk here, but I'm going to leave before this party ends, before you turn into a pumpkin and mice.' But the only problem here is the clocks have no hands and who is smart enough to really identify which are the bubbles that are forming? Which ones are systemic? The central banks didn't pick subprime credit.”

He said people who were tempted into higher interest yielding products should have very modest exposures.

“It's inevitable we'll have an economic downturn. Coronavirus may or may not cause it. When it happens, people who are investing in this riskier credit are going to have a lot of pain.”

Tags: coronavirus Covid-19 GRTV Hamish Douglass interest rates investment Magellan