Måns Carlsson

Ausbil Investment Management Limited (Ausbil) has announced the launch of the Ausbil Active Sustainable Equity Fund (Fund) as an exchange‑traded fund (ETF), expanding investor access to Ausbil’s established sustainable investment capability through the convenience and liquidity of the ASX.

ASUS provides exposure to an actively managed portfolio of predominantly Australian‑listed equities, selected primarily from the S&P/ASX 200 Index, that meet Ausbil’s sustainability approach. ASUS aims to deliver consistent, risk‑controlled outperformance of its benchmark over the long term. It generally holds between 30‑45 Australian‑listed companies and seeks to identify opportunities across market cycles and conditions.

Måns Carlsson OAM, Head of ESG and Co‑Portfolio manager, said the launch reflects the growing demand for sustainable investment solutions that go beyond exclusion screens.

“ASUS brings our active, research‑driven approach to sustainability to the ASX AQUA market, giving investors easier access to a portfolio built around companies which Ausbil believe have relatively good sustainability profiles and are ranked highly by Ausbil on ESG and positioned for long term growth. We believe ESG factors can be a powerful driver of long‑term performance, and ASUS is designed to capture that opportunity.”

Nicholas Condoleon, Portfolio Manager and Deputy Head of Equities, Long Only, highlighted the potential benefits of the active ETF structure for a broader range of investors.

“Quoting the Fund as an Active ETF allows investors to tap into Ausbil’s sustainable investment expertise with the convenience of trading on the exchange. Our process focuses on identifying quality businesses with strong fundamentals and sustainable competitive advantages, and we’re excited to offer this strategy in a format that enhances accessibility and transparency.”

Ausbil’s sustainability approach applies the Fund’s Controversial Activity Exclusion Policy and integrates proprietary environmental, social and corporate governance research. Companies are assessed on both what they do and how they manage ESG factors, resulting in a sustainability profile and score. Only those determined by Ausbil to have good sustainability profiles are considered for inclusion in the Portfolio.

“We are extremely pleased to launch ASUS as an active ETF, our fifth to be listed on the ASX,” said Mark Knight, Chief Executive Officer of Ausbil. “This expands access to Ausbil’s investment capability, enabling a broader range of investors, including retail and advised clients, to invest in a sustainable strategy with a strong track record.”

Since inception (31 January 2018), the Fund has generated a net return of 9.22% pa, compared to the S&P/ASX 200 Accumulation Index return of 8.36% pa, delivering an outperformance of +0.86% pa to 31 March 2026. The Fund has been rated ‘Highly Recommended’ and ‘Recommended’ by Lonsec and Zenith, respectively. The Fund was launched in 2018 and has A$394 million of funds under management as of 31 March 2026.

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Rob brings more than ten years of experience to the role, with a career spanning retail distribution, equities research and client advisory across the Australian market. Based in Sydney, he will be responsible for servicing wholesale clients throughout New South Wales and the Australian Capital Territory, reporting to Fawaz Rashid, Head of Wholesale Sales, ex-North America at Ausbil.

“Rob is a valuable addition to our distribution team,” said Fawaz Rashid. “His experience across retail distribution and investment management, coupled with a thorough understanding of the needs of wholesale clients, positions him well to contribute meaningfully to our business. We look forward to welcoming him as we continue to cultivate long-term partnerships with investors across the region.”

Prior to joining Ausbil, Rob spent six years at Allan Gray Australia in a wholesale distribution capacity, where he developed strong relationships with wholesale clients across the market. He also held a Research Manager position at GLG (Gerson Lehrman Group), business development roles at Mainstreet Financial Group and a directorship at TDU Link. Rob additionally serves as an Officer Cadet in the Australian Army Reserve.

“I’m very pleased to be joining Ausbil, given its strong reputation for active management and long-standing relationships with clients,” said Rob Lester. “I look forward to working with the broader distribution team to support our wholesale partners across NSW and the ACT.”

Rob holds a Chartered Financial Analyst (CFA) designation from the CFA Institute and a Bachelor of Business Management, International Business from the University of Queensland.

Ausbil Investment Management was established in 1997 and manages over $21.3 billion in funds under management as at 28 February 2026.

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Kate Machin

Ausbil Investment Management Limited (Ausbil) is pleased to announce the appointment of Kate Machin as Business Development Manager – Institutional, further strengthening its institutional distribution capability.

Kate joins Ausbil with nearly two decades of experience in investment management, spanning a variety of institutional and wholesale roles in Australia and New Zealand. Based in Sydney, she will be responsible for servicing institutional clients across New South Wales, Queensland and Western Australia, reporting to Adrian Amores, Head of Global Distribution.

“We are delighted to welcome Kate to Ausbil,” said Adrian Amores, Head of Global Distribution at Ausbil. “She brings deep experience working with institutional investors and consultants across Australia and New Zealand, along with a strong understanding of the evolving needs of this client segment. Kate’s appointment further strengthens our institutional distribution capability as we continue to build long-term partnerships with investors across the region.”

Before joining Ausbil, Kate was Client Director at Stewart Investors, where she managed key relationships with clients, consultants and prospects across the institutional segment. Her previous experience also includes an institutional client service role at Lazard Asset Management and wholesale distribution roles at Investors Mutual Limited.

“I’m very pleased to be joining Ausbil, given its strong reputation for active management and long-standing relationships with clients,” said Kate Machin. “I look forward to working with Adrian and the broader distribution team to support our institutional partners across Australia.

Kate holds a Certified Investment Management Analyst (CIMA®) designation from the Investments & Wealth Institute and a Bachelor of Economics, International Finance from the University of Queensland.

Ausbil Investment Management was established in 1997 and manages over $21.3 billion in funds under management as at 28 February 2026.

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Mark knight

Ausbil Investment Management Limited (Ausbil) is pleased to announce the launch of its fourth exchange-traded fund (ETF) this year, the Candriam Sustainable Global Equity Fund – Active ETF (ASX: GSUS).

Ausbil has launched GSUS in response to investor demand for an actively managed portfolio of best-of-sector listed sustainable equities from around the world.Ausbil and Candriam are related through a shared parent company, New York Life Investment Management LLC. This relationship enables Ausbil to provide access to Candriam’s global equity strategies in an ETF structure suited to Australian investors.

“Candriam’s investment process combines company level research with top down sectoral analysis to select stocks demonstrating good Environmental, Social and Governance (ESG) characteristics, according to Candriam’s ESG framework,” said Mark Knight, Chief Executive Officer, Ausbil. “We are excited to broaden access to Candriam’s sustainable global equity strategy, responding to the growing demand from investors seeking a more convenient and efficient way to invest in our sustainable investment solutions.”

“We believe Candriam’s sustainable investment approach provides a distinct competitive advantage,” said Paul Xiradis, Executive Chairman, Chief Investment Officer and Head of Equities at Ausbil.

The Fund is certified by the Responsible Investment Association Australasia (RIAA) for integrating ESG and sustainability objectives across its portfolio and stewardship practices.

This marks Ausbil’s fourth ETF launch in 2025, following the recent launch of the Ausbil Active Dividend Income Fund – Active ETF (ASX: DIVI), the Ausbil Global SmallCap Fund – Active ETF (ASX: GSCF), and the Ausbil Global Essential Infrastructure Fund (Hedged) – Active ETF (ASX: GHIF).

Candriam stands for “Conviction AND Responsibility In Asset Management” and manages approximately EUR$156 billion in assets globally, as at 30 June 2025.

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Paul Xiradis

Ausbil Investment Management Limited (Ausbil) has been awarded the prestigious Fund Manager of the Year honour at the 2025 Zenith Fund Awards, cementing its position as one of Australia’s leading active investment managers.

The award recognises the firm’s market-leading performance, depth of investment expertise and commitment to delivering outstanding outcomes for investors.

Ausbil was also the winner in two additional categories:

• Australian Equities – Small Cap, and
• Sustainable and Responsible Investments – Growth.

Paul Xiradis, Executive Chairman, Chief Investment Officer and Head of Equities at Ausbil, said the recognition reflects the consistency of Ausbil’s investment approach over time and its strength through market cycles over the past 28 years, underpinned by an experienced team and strong investment culture.

“This award reinforces what has guided Ausbil since inception in 1997, which is a disciplined focus on quality, fundamentals and teamwork. Markets change, but our active approach remains constant. Our teams work every day to uncover investment opportunities through deep research and rigorous analysis, and this recognition is a credit to that effort,” Mr Xiradis said.

Mark Knight, Chief Executive Officer at Ausbil, added: “The award highlights Ausbil’s enduring focus on long-term outcomes. To be recognised as Fund Manager of the Year is a huge honour, and we’re proud to be recognised among Australia’s best.”

“The award reflects the quality of our people, the strength of our process and the trust placed in us by our clients,” Knight added.

The Zenith Fund Awards celebrate excellence across Australia’s investment management industry, recognising fund managers who demonstrate strength across philosophy, process, people, performance and organisational quality.

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Mark knight

Ausbil has announced the launch of its first active exchange-traded fund (Active ETF), giving investors and advisers dual access to its Active Dividend Income strategy.

The Ausbil Active Dividend Income Fund – Active ETF (ASX ticker: DIVI), launched in 2018, is now admitted for trading on the ASX. It has A$967 million of funds under management as of 31 August 2025.

DIVI, an actively managed ETF, holds between 25 and 50 listed companies which Ausbil believes support consistent dividends and franking credits for investors that grow with inflation over time. It provides regular monthly income drawn from dividends of Australian companies, whilst aiming to protect investors’ capital against inflation.

“We are excited to officially launch the Ausbil Active Dividend Income Fund as an Active ETF on the ASX,” said Mark Knight, Chief Executive Officer of Ausbil.

“This milestone marks a significant step in making our income-focused strategies more accessible to more investors. By offering an Active ETF, we’re meeting the requests of brokers, financial advisers, SMSFs and mum and dad investors for a more convenient and efficient way to generate regular monthly income from equities, with the potential for additional capital growth.”

Michael Price, Portfolio Manager of DIVI, said the Fund’s listing on the ASX offers a competitive advantage through its active approach to stock selection. “Ausbil’s active management, a rigorous top-down macro and bottom-up fundamental process, and dynamic portfolio positioning provides investors with a solution focused on delivering sustainable monthly income with the benefit of franking credits,” he said.

Since inception, (30 June 2018), DIVI has generated 9.18% pa (net of fees) in returns, delivering consistent income and capital growth versus the benchmark return of 9.38% pa, as measured by the S&P/ASX 200 Accumulation Index, ending 31 August 2025. For a full table of returns net of fees, visit www.ausbil.com. au/divi.

DIVI focuses on providing high levels of dividend income and franking credits, aiming to deliver a monthly income stream in excess of the benchmark, that is able to grow with inflation over time.

“With a handful of large banks and resource companies paying the majority of dividends each year, relying solely on these sectors can expose investors to risk if dividends are cut. DIVI’s active management approach allows us to diversify beyond the biggest payers, targeting high-quality companies with sustainable dividend growth,” says Price, “and offers the resilience to maintain income through changing market conditions. This ensures our investors are well-placed to be exposed to quality income opportunities in any market environment.”

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Arden Jennings

Ausbil Investment Management (Ausbil), a leading investment manager, is proud to announce that the Ausbil Australian SmallCap Fund (Fund) recently celebrated its 5th anniversary. This milestone also coincides with the Fund achieving the #1 top- performing Australian small-cap fund1 since its inception.

Over the past five years, the Ausbil Australian SmallCap Fund has achieved a net of fees return of 23.14% pa, compared to its benchmark, the S&P ASX Small Ordinaries Accumulation Index, of 7.73% pa, delivering 15.41% pa outperformance. The Fund’s consistency of performance is notable, maintaining at least top-3 ranking for since inception gross performance, in the Mercer Survey (Australian Small Companies (Ex 100 Universe), for 53 consecutive months over the same period.

At the helm of the Ausbil Australian SmallCap Fund are Arden Jennings and Andrew Peros, two seasoned investment professionals with a combined experience of over 30 years in the financial services industry. Their leadership and expertise have been instrumental in the Fund’s success.

“We are incredibly proud to achieve this 5-year milestone. Our performance is a direct result of the unwavering commitment of our Emerging Companies team. We remain focused on delivering superior returns for our investors and are excited about the opportunities that lie ahead for Australian small caps,” said Arden Jennings.

“Our team’s ability to navigate this market and identify undervalued and under-owned gems has been key to our success. We are grateful for the trust our investors have placed in us and are committed to continuing our track record,” said Andrew Peros.

In recognition of his contribution to the Ausbil Emerging Companies investment capability, Beyhan Irmako has been promoted to Co-Portfolio Manager, Small & Microcap. Alongside Tom Cutler, Co-Portfolio Manager, Beyhan adds further support to Ausbil’s growing Emerging Companies capabilities, comprising ASX-listed mid-cap, small cap and micro-cap companies.

As the Ausbil Australian SmallCap Fund enters its sixth year, the team is poised to build on its success. The team also manage the Ausbil MicroCap Fund, which has a 15-year track record of outperformance.

With a continued focus on its disciplined approach and a commitment to delivering outperformance, the team is well-positioned to capitalise on the evolving landscape of the small and micro-cap equity market.

The Ausbil Australian SmallCap Fund is available for investment directly with Ausbil and on Asgard, BT Panorama, CFS Edge, Dash, Hub24, MLC Expand, Macquarie Wrap, Mason Stevens, Netwealth, North, Powerwrap and Praemium.

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According to Lonsec’s report, the “Co-Portfolio Managers bring a wealth of experience and a deep understanding of the global small-cap market. Their alignment with the Fund’s objectives ensures a cohesive and focused investment strategy.”

Managed by Simon Wood and Tobias Bucks, the Ausbil Global SmallCap Fund aims to exploit the inefficiencies within the asset class by investing in quality companies with unrecognised growth potential at attractive valuations.

“We are delighted with Lonsec’s upgrade of the Ausbil Global SmallCap Fund to Recommended,” said Mark Knight, CEO at Ausbil.

“This recognition underscores Ausbil’s commitment to delivering superior returns for our investors through a disciplined and differentiated investment approach. We believe this upgrade will further strengthen our position in the market,” Knight added.

Launched in May 2018, the investment strategy uses both qualitative and quantitative analysis and tools alongside a disciplined risk management process, with the aim of producing consistent and risk- controlled outperformance. The Fund’s universe is the 23 developed markets that comprise the MSCI World Small Cap Index.

The Ausbil Global SmallCap Fund is available on Asgard, BT Panorama, CFS Edge, Hub 24, MLC Expand, Macquarie Wrap, Mason Stevens, mFund, Netwealth, North and Praemium.

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Overall, tariffs will result in upward pressures on supply chains, with input prices keeping US inflation somewhat elevated, and slowing the pace of global trade growth. Ausbil’s view on tariffs under Trump is that the US is expected to benefit at the marginal cost of higher inflation.

Despite rapid change, the global growth outlook remains positive

Global macro settings are expected to remain within their ‘back to normal’ levels in 2025 and 2026, supported by a shallower global easing cycle.

We are forecasting a sustainable step-up in global growth to 3.5% for 2025, elevated but stable inflation relative to central bank target levels and limited real rate cuts. The recalibration of restrictive policy settings appears to have run its course, closing in a new higher neutral level relative to recent history.

The US Federal Reserve has pivoted and paused rates in the target range of 4.25-4.5% as “inflation remains somewhat elevated.” The structural themes of decarbonisation and accelerating de-globalisation will continue under Trump 2.0, and will underpin activity.

Taken together, global GDP is continuing on a positive upward trajectory towards its trend rate. Underlying resilient private demand, business investment, employment growth, and easier financial conditions will sustain the expansion of the global business cycle.

We remain vigilant with respect to unpredictable geopolitical events, including the risk of underestimating the impact from Trump’s tariff policies.

We are forecasting a resilient US, and a modest recovery for Europe.  The US growth outlook sustained in the mid-2% range will be driven by Trump’s pro-growth and pro-business policies.

Growth is driven by a resilient labour market remaining at full employment levels, underlying strength in the consumer from real wages growth, a positive wealth effect and private capex investment. The US is experiencing a sustained productivity uplift, where the pace has stepped up to 2.0% from a low pre- pandemic 5-year average of 1.4%.

Europe experienced shallow growth conditions that felt more like a recession, especially for Germany. We are forecasting a gradual recovery in growth, assisted by European Central Bank rate cuts. Year average real GDP growth was a subdued 0.9% in 2024, following 0.4% in 2023 and 3.4% in the post-pandemic rebound of 2022.

Inflation is under control but will remain elevated

We are forecasting elevated but stable inflation relative to central bank target levels in the US and globally.

Core inflation dynamics continue to see persistent sticky services inflation (ex-housing), moderating housing inflation at a much slower rate, and upside risk from goods inflation from potential supply and tariff driven input price shocks.

You can stop worrying about recession

In our view, lingering market fears of a US recession are unfounded and the risk is mitigated by the fact that central banks have significant room to cut nominal rates if recessionary signals eventuate.

The global economy is on a positive upward trajectory in 2025, with lower inflation and real rate cuts.

We remain vigilant on unpredictable geopolitical events that may materially impact our view. War in the Middle East remains a risk to the price of oil and supply chains. The war in Russia and Ukraine carries some existential nuclear risks. These risks are unpredictable but at this stage we do not expect material market disruption.

That said, underlying resilient private demand, business investment, employment growth, and multiple rate cuts are expected to sustain the expansion of the global business cycle.

By Jim Chronis, Ausbil Chief Economist, Associate Director – Debt and Diversifieds

———

What does Trump 2.0 mean for global small caps?

Before Trump 2.0, we had isolated several key themes that are driving portfolio construction. These thematics remain intact and in some cases, we expect them to be accelerated under Trump 2.0.

This includes the electrification of things, AI and data centre demand, and investment in grid upgrade and expansion.

These growth drivers have benefited from significant fiscal stimulus in the CHIPS Act and the Inflation Reduction Act.  Trump 2.0 is expected to add deregulation, tax cuts and a general pro-business approach to governing that we expect to be incrementally stimulative for the US economy, especially in sectors like energy, industrials focused on US manufacturing, information technology firms in the data centre and AI complex and companies leveraged to electrification and grid upgrade.

As an example, Celestica, is a market leader in data centre networking equipment, headquartered in Canada, is expected to benefit from ongoing investment in US data centres, AI and networking efficiencies. President Trump’s recent announcement of the Stargate AI project, a US$500 billion joint venture between OpenAI, Oracle and Softbank, highlights the robust investment environment in technology.

The clear and present risk we are monitoring is that of tariffs, and the potential impact on the US and world economy. Tariffs and potentially strong growth in the US could lead to inflation accelerating again which may require the US Federal Reserve to end their interest rate cutting cycle and potentially consider tightening interest rates.

However, many of the small cap companies in the US undertake a lot of their manufacturing domestically therefore they are heavily insulated from the effects of tariffs, unlike their foreign competitors. Ultimately this could give a boost to US small-cap companies.

By Simon Wood & Tobias Bucks, Co-Portfolio Managers Ausbil Global Small Caps

———

What does Trump 2.0 mean for global infrastructure

Trump 2.0 comes amid the multi-year infrastructure stimulus undertaken by the Biden government, and which we believe is unlikely to cease under Trump.

From an infrastructure perspective, it helps to look at Trump 1.0 for some help in extracting fact from rhetoric. Under Trump 1.0, in contradistinction to the fearmongering on renewables and fossil fuels, coal was retired more under Trump than any other prior administration, and renewables grew, albeit modestly. In fact, fossil fuel investment actually increased again under Biden, though against a rapid increase in clean energy investment.

While Trump failed to win a consecutive second term, this subsequent second term offers him four years to achieve his goals. In energy, Trump is looking back at fossil fuels in the form of LNG as a base load power to stimulate onshoring for the coming four years, releasing volume that is readily available.

However, the latent time delays for other power sources like gas turbines, hydro and nuclear, suggest that Trump will necessarily need to be supportive of wind and solar renewables that can be readily expanded during his term to achieve Trump

Trump’s energy goals and his policy for onshoring, protecting and expanding US manufacturing is a major driver of pipeline infrastructure for the liquification and export of natural gas as LNG. Both pipelines and rail are expected to benefit from better growth, more energy shipping, onshoring and ‘made in America’ protectionist policies.

Across all infrastructure sectors, Trump deregulation is expected to spark more M&A, and just as Australia liberalised the market and precipitated significant M&A activity, we believe the US should follow, subject to state and anti-trust considerations.

Artificial intelligence and data storage will also add to energy demand. These are areas that are benefiting under Trump policy with the announcement of Stargate, and his close relationships with a range of technology leaders. In infrastructure, we are agnostic as to which AI models may become dominant (like DeepSeek, Gronk, Gemini, Chat GPT, etcetera) as infrastructure will benefit from the overall rise in energy demand. In general, we expect that improved macro-economic conditions and reshoring will benefit all infrastructure sectors.

Risks to avoid

The markets ran hard in calendar 2024, and while Ausbil is calling calendar 2025 a period of ‘risk-on’ given the positive economic conditions, we still acknowledge that there is a real risk around valuations. We think that improving growth, and pro-business policies will help reduce this risk. Tariffs are likely to cause some distortions, but for contracted infrastructure assets, the risks are relatively low.

There are also potential currency risks. The US budget deficit will expand with lower taxes and potential interruptions from tariffs, however, the potential is for onshoring and resurging US manufacturing to offset this with greater productivity. Finally, the nature of Trump foreign policy is such that hard dealmaking could precipitate more geopolitical volatility, though looking back at Trump 1.0, where no major geopolitical disasters occurred, it is hoped Trump 2.0 will be similar.

Positioning for the macro-economic outlook

As we progress through 2025, we believe essential infrastructure stocks remain positioned for continued growth despite increased market volatility. President Trump’s administration is expected to introduce fiscal stimulus and deregulation measures, which could benefit US infrastructure investments such as rail, energy and utilities.

The AI sector’s rapid development is set to drive structural increases in electricity demand, further supporting North American utilities and energy infrastructure companies. LNG exports continue to play a key role in global energy markets, including Cheniere’s Corpus Christi expansion nearing completion, in which we have a holding.

In Europe, uncertainty remains elevated due to political instability and macroeconomic concerns. However, select infrastructure assets continue to offer attractive opportunities.

While infrastructure stocks have faced headwinds from interest rates, the fundamental case remains strong. We see valuations as reasonable and continue to focus on high-quality, well- positioned companies. Our long-term investment thesis remains intact, with a robust pipeline of opportunities in energy, transport, and across the utility space.

By Tim Humphreys, Head of Global Listed Infrastructure

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Paul Xiradis

While the market remains bearish for financial year 2025, our view is for positive earnings growth in FY25 and into FY26. We believe earnings growth will recover in FY25 more than the market expects – broadening across sectors, and moving down the market cap spectrum.
(Current market consensus shows almost negligible earnings growth (EPSg) for FY25 followed by two mid-digit EPS growth years of +8.0% and +5.0% for FY26 and FY27 respectively.)

Ausbil is of the view that expected EPS growth will improve in an easing environment with no recession, improving economic growth and near full employment.
We see relief for balance sheets and income statements from a number of factors. We expect to see the RBA commence easing their monetary policy in 2025, joining the Fed, ECB and other developed markets. This will add relief on cost of debt and rollovers.

As inflation has been falling this will also add positively to income statements. Wages are still relatively in control.

On the impact of China, the September surprise rate cut of 50bps and the promise of further stimulus and support as needed has helped to stabilise the outlook for China leveraged companies.

The US election outcome with the return of President Trump was welcomed by the market on pro-business policies compared to higher taxes and other restrictions under the alternative. From an earnings outlook perspective, the US economy is expected to perform well under Trump in 2025, and onshoring policies and protection should be beneficial for the US economy.

However, the prospect of a trade war with China and Europe with rising tariffs could be a significant risk to earnings in a number of China facing sectors, including those whose manufacturing base is in China, and those that sell to China including resources. We are monitoring these risks closely, but earnings growth should benefit overall with a pro-business US government.

Australia is also expected to benefit from its growing export exposure to the Indo Pacific (ex-China) region with growth rates currently running in the range of 5% to high 6% for India, Indonesia, the Philippines and Vietnam.

By way of background information, in September 2022 Australia joined the Indo-Pacific Economic Framework (IPEF) alongside 13 members from across the Indo-Pacific region, including Brunei Darussalam, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Republic of Korea, Singapore, Thailand, the United States and Vietnam. The region accounts for around 40 per cent of global GDP and includes eight of Australia’s top ten merchandise trading partners.
In terms of unpredictable risks, geopolitics is probably the most relevant. War in the Middle East remains a risk to the price of oil and supply chains. The war in Russia and Ukraine carries some existential nuclear risks. These risks are unpredictable, but at this stage we do not expect material market disruption. Further, under Trump we expect these risks to dissipate.

Opportunities

We believe decarbonisation and the energy transition remain significant themes that will drive value across resources, energy, utilities and the mining services sector with respect to critical commodities.

The rapid normalisation of rates in 2023 and 2024 was especially punishing on commodities given the impact this had on slowing economic growth. However, as we had been forecasting, the economy did not enter recession, growing at a sub-trend positive through 2024. With an outlook for improving growth in 2025, we are starting to see commodities shifting upwards again.

Copper is expected to see major demand upside from decarbonisation, a three-fold build out in global grids by 2030, increased demand from data centres with booming AI, and increase demand for EVs and battery storage.

Though it has had a tough 2024, we still expect lithium to see major demand growth alongside rare earths for battery storage and the electrification of things. Companies such as IGO, Pilbara Minerals, Lynas Rare Earths and Sandfire Resources will benefit from this demand. So will BHP and RIO which have major copper divisions.
As the world increasingly looks at the potential for nuclear energy to underpin the base load transition, supporting uranium as an energy source with much lower operating greenhouse gas emissions than traditional fossil fuels.

In bulks, we see ongoing demand from China for iron ore, growing demand from India for metallurgical coal, and global demand for steel, including US demand from stronger housing, decarbonisation infrastructure, renovation and remodelling.

The market is showing a wide dispersion of opportunities, and many in companies that are globally facing and market leaders in their sectors.
With an improving growth outlook, we are seeing opportunity in cyclical names. This includes resources as I have noted, the construction materials and consumer discretionary sectors. We have been incredibly selective in theses cyclical sectors, with names such as Wesfarmers, James Hardie in construction materials, and Aristocrat Leisure.

Banks tend to be a good proxy for the economy. With economic growth improving and the potential for monetary easing to support consumer spending, we think that some exposure to the best bank and diversified financials is important in 2025. We are overweight in names like National Australia Bank and Macquarie Group.

With respect to the outlook for lower rates in 2025, we are seeing opportunities in real estate in an environment where cap rates are likely to compress albeit moderately. Real estate has benefited from rental ratchet clauses that capture inflation upside, and will continue to benefit from higher rents in a lower inflationary environment, however the sector overall has been in a long structural adjustment following the rapid adoption of online since then pandemic. Goodman Group has been a preferred real estate exposure given that it is benefiting from two major thematics, the rise of smart logistics warehouses for online fulfillment and distribution, and the rapid uplift in demand for data centres.

On key thematics, in technology we are seeing structural earnings growth in technological transformation, the rise of artificial intelligence (AI), and the enablers and businesses that increasingly operate in the digital environment, including communications companies.

The current secular expansion of data, cloud computing, AI and storage is driving huge investment in the enablers of change. This includes semiconductor providers like NVIDIA and BE Semiconductors, a sector not available in Australia. However, other areas include data centres, energy and energy storage that back-up data processing, telecommunications and internet companies that support the web of connectivity and data. Examples of companies that stand to benefit include NextDC and Telstra.

The companies that stand to benefit from this technological enablement are those that can leverage the networking and processing power offered by enablers to capture more business, more customers and at lower and lower costs. Examples of such companies include Block, REA, Life360 and WiseTech.

There are always quality names in our portfolios that manage to consistently grow earnings, such as CSL, Xero and REA Group.

Overall
We believe the market will trade higher next year, driven by lower rates, improved earnings, and the macro-economic outlook, with the possibility of increasing corporate activity.

For companies with positive earnings growth outlooks that exceed consensus, it is definitely ‘risk on’.

Consensus currently has low expectations for FY25 earnings growth in a market which is likely to be positive for business. We think that earnings will be better than expected by the market for FY25, and we are less focused on defensive names and more invested in growth and cyclical names to take advantage.

By Paul Xiradis, Executive Chairman, Chief Investment Officer and Head of Equities

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