Risks emerging from the pursuit of yield

Steve Johnson, CIO of Forager Funds, says the 8% rally in equity markets in CY15 has been fuelled by further PE expansion - rather than improved corporate earnings. "It's being driven by lower interest rates and I think that is a very difficult tide to swim against. We are seeing a lot of foreign money coming into the country. Some of my friends who work in the trading space and work with offshore hedge funds are seeing the first big flows into Australia that they have seen for the past five years." Johnson says this flow of money has been...

Steve Johnson, CIO of Forager Funds, says the 8% rally in equity markets in CY15 has been fuelled by further PE expansion - rather than improved corporate earnings. "It's being driven by lower interest rates and I think that is a very difficult tide to swim against. We are seeing a lot of foreign money coming into the country. Some of my friends who work in the trading space and work with offshore hedge funds are seeing the first big flows into Australia that they have seen for the past five years." Johnson says this flow of money has been attracted by falling interest rates and investors seeking out the yield on offer in Australian equities.

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