Income at home, growth abroad: the case for a more deliberate global tilt

For much of the past decade, the instinct in Australian advice practices was to stay close to home. Familiar companies, franking credits, a market investor could understand. The default passive global allocation only reinforced that comfort, keeping portfolios anchored to what felt familiar.

Sarah Gonzales, partner and chief investment officer at Apt Wealth, has spent the past few years pulling firmly in the other direction.

The shift has been deliberate. “We have been, and continue, tilting more towards global markets,” she says, “while still maintaining selective exposure to Australia for its income characteristics.” That selective framing matters. The domestic market has not stopped being useful. It has become more limited.

The core problem, Gonzales argues, is concentration. Australian equities have become progressively more dominated by financials and resources, two sectors whose earnings drivers are well understood but whose long-term growth ceilings are relatively clear.

Global markets offer something different: exposure to technology, security and defence, and the structural tailwinds powering some of the most compelling earnings stories of the current cycle.

Not as neutral as it looks

The benchmark question complicates things considerably. A standard passive global equity allocation places roughly 64 cents in every dollar into US stocks. For clients who believe they are achieving genuine diversification, that is a significant mismatch between perception and reality.

“A passive global allocation today isn’t truly neutral,” Gonzales says. “It is a concentrated position in the US, particularly large-cap growth. While many clients believe they’re broadly diversified, they’re often unintentionally exposed to a single market, a narrow set of companies, and a specific style bias.”

She is careful to add nuance here. Many of the largest US-listed companies derive substantial revenue from outside the United States. Their listing location overstates the geographic concentration in a purely economic sense. But index construction still reinforces that growth-heavy, US-dominant tilt, and the valuation implications are real.

The practical response at Apt Wealth has been to retain passive exposure as a cost-efficient core, while introducing deliberate tilts away from US dominance. That has meant increasing weight in active and passive strategies with broader geographic mandates and using the Australian equity allocation as a counterbalance: value-oriented and income-focused where the global sleeve is growth-oriented.

“Rather than moving away from passive entirely, it has changed how we use it.”

The emerging markets question

Gonzales takes a measured position on emerging markets. Apt Wealth does not currently hold a direct EM allocation, preferring to access the exposure through diversified global equity strategies. The reasoning is not structural aversion but a preference for managed risk.

“Getting genuinely comfortable recommending EM comes down to how that risk is managed, not just the headline growth story,” she says. Country-level policy risk, regulatory unpredictability and market structure issues can swamp the underlying fundamentals, particularly in China, and a compelling macro case does not automatically translate to reliable client outcomes.

That said, she is more constructive than the cautious framing might suggest. A softer US dollar has historically been a tailwind for emerging market assets, and several EM economies now carry comparatively lower debt burdens than many developed markets.

“The evolving macro backdrop is creating a more balanced and potentially favourable opportunity set than in prior periods,” she says.

Where EM exposure is accessed through high-quality active managers with clear governance frameworks, it can play a useful diversifying role. The key is sizing it appropriately and setting client expectations honestly.

Where active earns its keep

On the active versus passive question, Gonzales is characteristically precise. The two approaches are complementary rather than competing, and the division of labour is fairly clear. In highly efficient, well-researched segments of the market, principally US large caps, the hurdle for active managers is high. Low-cost index exposure is generally the more reliable choice after fees.

“In less efficient parts of the market, such as small and mid-caps or emerging markets, there’s greater dispersion, weaker coverage and more structural distortions, which creates a stronger opportunity set for active managers,” she says.

Passive for core efficiency, active deployed selectively where the research edge is more likely to translate into genuine alpha. That division shapes how Apt Wealth constructs its global equity sleeve.

AI exposure has become a related conversation. In most client portfolios, it has arrived incidentally rather than by design, carried through benchmark concentration in a small group of mega-cap technology companies. Gonzales is not inclined to add more on top. “We think the role of active management is less about increasing AI exposure, and more about diversifying it,” she says, pointing to the broadening reality that AI benefits will spread across industries over time, not remain concentrated in the names that dominate the current index.

Currency as a portfolio characteristic

Currency sits in a slightly different category for Gonzales. She treats it as a portfolio characteristic to understand and manage, rather than a variable to actively trade.

Over long investment horizons, currency movements tend to wash out, and the short-term volatility they introduce can be genuinely useful.

“Unhedged global equities can provide a natural hedge in risk-off environments, when the Australian dollar typically weakens,” she explains.

That asymmetry has real portfolio construction value, even if it introduces noise in calmer conditions. The practical implementation at Apt Wealth uses a blend of hedged and unhedged exposure, avoiding an all-or-nothing position.

The client conversation, she says, is less about forecasting currencies and more about managing expectations. Return variability from currency movements is real, but so is its diversifying contribution. Framing it that way, rather than as a problem to be solved, tends to land better.