Markets

Diversification is invaluable, and this is especially apparent during times of disruption and uncertainty. Exposure to infrastructure assets can help investors take advantage of the current volatility, but keeping asset correlation in mind is key.

Basing an investment strategy on the goldilocks investment markets of the last 35 years gives rise to considerable risk, writes Michael Block, and now might be the time to get out of growth assets.

Although more Australian companies are paying dividends in 2023, many have reduced payouts, with the year-to-date total slightly behind 2022’s figures, according to CommSec research. The big miners are leading the cuts, while energy producers are lifting dividends to reflect record high gas prices.

Large language models like ChatGPT are part of a long technology continuum driven by Moore’s law, the observation that transistor capacity doubles every two years. To get in on AI’s surging growth, says Munro Partners’ Nick Griffin, investors should focus on the big – and not-so-big – names already poised to come out on top in the “race to shrink”.

The clean-energy transition represents a huge opportunity for investors to earn good returns from investments that have a positive environmental impact – and ethical investors in Australia have particularly good cause for optimism, according to Australian Ethical.

Despite increased volatility emanating from the banking sector, tech stocks have been supported by falling bond yields on fears the global economy could slip into recession this year, with big-name companies leading the gains.

Small cap investing has considerable upside, which the long-term returns data shows. But many small caps are less than quality grade, and the managers picking them can be rife with bias.

Shifting market dynamics mean some of the investment themes that worked in recent years are set to give way to new opportunities. Man Group’s Andrew Swan and Prime Value’s Richard Ivers recently discussed the promising outlook for Asia and small-cap stocks, where it’s all about fundamentals.

Valuing companies and their potential for growth is a slippery, convoluted process. Quality is a key metric, according to Loomis Sayles, but other factors play an equal role.

With some real asset trading at 20 to 30 per cent below their fundamental value, HMC’s David Di Pilla says there are “compelling” opportunities for managers that can spot value and raise capital.

Dividend investing can be a good source of defensive income in volatile times, but changing fundamentals mean resources companies and banks may be the weaker play in 2023, with opportunities emerging beyond these traditional Australian dividend payers – although valuation will be key.

At The Inside Network’s Alternatives Symposium, Kyle McCarthy and David Lewis encouraged investors to define private credit very broadly to reap the benefits of diversification and strong risk-adjusted returns.