Equities

Investors will need to adjust their expectations (and portfolios) to account for higher for longer interest rates, slower economic growth, stickier inflation and a testing geopolitical environment. Keeping key pillars of quality in mind when assessing companies remains critical.

Rising interest rates and elevated stock multiples have brought down the equity risk premium and created a highly advantageous environment for value investors, according to Pzena Investment Management.

The current market isn’t just a poor marking stick for active investment expertise, but a dangerous one, with concentration risk at alarmingly high levels. Are fund managers right to be wrong?

With over 2 million Australians invested in ETFs and every second SMSF holding them, it’s little wonder managers are keen to launch active ETF versions of their most successful funds.

Historically, periodic outperformance by a cohort of stocks linked by sector or region – often with a catchy moniker – has been a mainstay. As has that group’s inability to maintain dominance over the long term.

HMC Capital has demonstrated how effective its active engagement strategy is with the success of the Sigma/Chemist Warehouse merger. Now David Di Pilla and his team have their sights set firmly on the real estate sector.

Investors may find themselves gravitating towards ‘value-light’ or indexed versions of a genuine value investment strategy, Pzena says, but both are likely to dilute the likelihood of generating significant long-term outperformance.

Each of these five fund managers focus on finding undervalued stocks that have significant potential for growth. And in Australia – on a performance level, over a 3 year term – they’re currently the best at what they do.

As central banks signal that global economies may have reached a tipping point and the inflation cycle may soon retreat, investment teams need to refocus on fundamentals. In 2024, experts say, innovation will be key.

There is a world of complexity behind the construction of a highly concentrated portfolio of stocks that consistently outperforms the benchmark. According to Bob Desmond it requires patience and a willingness to operate in “a very select universe”.

With interest rates at or near their peak, the headwinds buffeting small caps could turn into tailwinds. According to Australian Ethical portfolio manager Andy Gracie, that might make now an opportune moment to invest in the sector.

The benchmark core equities sector is a fundamental sleeve in any sophisticated portfolio. Most profess top quartile returns, but which five have genuinely outperformed the market over a three year term?