Why equity portfolios are moving global, and further into venture

Equity portfolio construction has long been framed around geography, how much exposure to Australian equities? How much allocated to International equities? Do Emerging Markets have a role to play?

Will Hauser’s view is that this framework is becoming less useful. In his telling, the starting point should not be location, but where investors are most likely to find sustained earnings growth. Right now, that still points firmly to the US, but it also extends into earlier-stage private markets where many of the most compelling Australian growth companies are emerging.

That shift has consequences. Portfolios become more global, currency becomes more relevant and the boundary between listed and private markets starts to blur. For advisers, the challenge is no longer just allocating across regions. It is deciding where along the growth spectrum to invest, and how to manage the risks that come with that.

Earnings growth matters more than geography

Hauser’s core philosophy is simple. “You want to be investing in high-quality companies that are consistently growing their earnings,” he said. That principle underpins how he structures portfolios, with a strong tilt towards global equities, particularly US-listed businesses where growth remains most resilient.

This is not just a macro call. It reflects a deeper view that traditional geographic allocations can be misleading. Investors often feel they need a set a portion in Australian equities and a set portion internationally, but Hauser suggests that mindset is outdated. If the best growth opportunities are offshore, portfolios should reflect that reality.

However, this introduces a second-order issue, currency. As Australian investors increase exposure to global markets, they are also taking on more currency risk. Hauser notes that the level of hedging in client portfolios has become a more prominent client conversation, particularly as the Australian dollar has moved more sharply in recent periods.

“Underlying global equity performance has been pretty good,” he said, “but it’s a harder conversation… when the Aussie dollar is up over the same period.”

That dynamic means currency management can no longer be an afterthought. Hedging decisions, once relatively static, are now becoming more active considerations in portfolio construction.

The opportunity set is shifting away from Australia

Hauser is also clear that not all equity markets offer the same opportunity set. His view on Australian small-caps is notably cautious. He questions whether the quality of companies coming to market in Australia is sufficient to justify meaningful allocation, particularly when compared with global alternatives.

“There’s hardly any of them,” he said, referring to new listings, and those that do come to market often struggle to maintain early momentum. More importantly, many of the highest-quality emerging businesses are no longer listing locally. Instead, they are staying private or listing offshore.

This reflects a broader structural shift. Some of Australia’s most promising growth companies, names like Canva, Rokt and Employment Hero, are being built entirely in private markets. For advisers, that raises an uncomfortable question. If the next generation of growth is not appearing on the ASX, can listed portfolios alone still capture enough upside?

“If you really want the outsized returns, you need to go earlier-stage.”

Hauser’s answer is increasingly ‘no.’ While listed markets still have a central role, he believes investors need to look further along the spectrum, particularly into venture and growth equity, to access the most compelling opportunities.

Venture requires a different mindset

Hauser’s interest in venture capital is not casual. It reflects a deliberate move to access higher-growth opportunities earlier in their lifecycle. But he is equally clear that this part of the market requires a different approach to both manager selection and portfolio construction.

When considering the plethora of options available when investing in Venture Capital, one of the key trade-offs he highlights is between diversification and concentration. More diversified venture portfolios may deliver steadier outcomes, typically in the two to three times money on money return range. More concentrated strategies, by contrast, introduce greater risk but also the potential for significantly higher returns.

“It’s basically impossible to get a 5x plus result from venture” in a highly diversified model, he said, whereas more concentrated portfolios can potentially deliver those outcomes, albeit with a much wider range of possible outcomes, so higher risk.

That insight shapes how Hauser approaches manager selection. His team initially focused on larger, global managers with established track records, aiming for more predictable outcomes. Over time, that has evolved into a deeper interest in smaller, more specialised funds, particularly in the Australian market, where the potential for outsized returns may be greater.

This is where another idea resonates strongly with him. “Size eats alpha,” a concept that reflects the difficulty larger funds face in generating exceptional returns. Bigger funds need bigger wins, and those opportunities are harder to find. Smaller funds, by contrast, can generate strong outcomes from a broader set of companies.

Access and timing remain critical

Despite the opportunity, Hauser is realistic about the challenges in venture. Access to the best deals remains the defining factor, and timing can materially influence outcomes. His comments on valuation cycles are instructive. At the peak of the market in 2021, some early-stage companies were trading at multiples of 30 times revenue, levels he describes as “ridiculous” in a normal environment.

Today, conditions appear more balanced. Valuations have normalised, capital flows have moderated and the opportunity set may be more attractive for new vintages. Historically, he notes, vintages following weaker periods, such as what we saw from a number of 2020 and 2021 vintages, have often delivered stronger returns.

That said, venture is not for every client. The long duration, often 10 years or more, requires a different mindset and a willingness to accept illiquidity. For those that can tolerate it, however, the potential after-tax returns, particularly through structures such as Early Stage Venture Capital Limited Partnerships (ESVCLPs), can be compelling.

Hauser also places venture within a broader equity framework. While he identifies as a growth investor, he acknowledges the current environment may require more balance. With interest rates normalising, inflation sticky and equity market volatility elevated, portfolios may need a blend of growth and value characteristics, rather than relying solely on one style.

For advisers, his broader message is pragmatic. Equity portfolios are evolving. The centre of gravity is shifting globally, the most exciting companies are often private and the tools required to access them are becoming more complex. That does not mean abandoning listed markets, but it does mean recognising their limitations.

In that context, the role of the adviser becomes more nuanced. It is no longer just about allocating across regions or sectors. It is about navigating a wider spectrum of opportunities, managing currency and structure, and deciding how far along the risk curve each client is willing to go.