Markets

The frictionless movement of assets is becoming a common feature of markets around the developed world, yet Australia remains a step behind. The ASX is in no mood to rush the move to T+1, however, after its calamitous attempt to implement distributed ledger technology.

The global banking system has proven both resilient and lucrative for investors since it seemed to teeter on collapse just over a year ago. The turnaround highlights the kind of alternatives available for those that don’t see enough value in the prevailing big tech stocks.

Real estate credit funds have firmed as an attractive source of alternative returns in the past few years. What matters, however, and what doesn’t, for these non-bank private credit lenders, has largely been left unexplored by investors.   

Getting to net-zero by 2025 will require an enormous shift of capital. This can only happen if groups with leverage apply pressure to financial services entities that are at the coal-face of change.

The disconnect is not about the big technology companies themselves, the famed value investor believes. It wasn’t in 2,000 and it isn’t now. The disconnect is about their valuations.

From residential and commercial backed mortgage securities, to whole loans and government issued bonds, there is a range of investment products that are backed by housing mortgages.

While financials and materials dominated trades leading into 2024, the popularity of other sectors like healthcare and information technology followed generational, and even demographic, lines.

Owning the largest stocks has historically been a recipe for underperformance over every period, according to value house Pzena, but the madness of benchmark construction means some investors have few choices but to.

In the near to medium term, the group forecasts “ample opportunity” in the loan asset class to generate higher than average returns while maintaining a minimal risk profile for investors.

The historic outperformance of big tech stocks in the US may look like a global outlier, but many developed markets (including ours) have high levels of concentration risk. That may not be the case for long, with a likely softening interest rate environment set to re-order indexes around the world.

Valuations at the top end of indexes are sky high, but with that comes inflated forecast earnings. For savvy investors, it may be time to rotate towards more value-oriented stocks according to Eric Marais from Orbis Investments.

The banks may not be perfect, but their collective role in facilitating a developed ecosystem, combined with the leverage they have through lending and capital allocation, means they often fall within Australian Ethical’s “investible universe”.