AdviserVoiceGSFM Archives - AdviserVoice https://www.adviservoice.com.au/source/gsfm/ Financial planner information & financial planner education/CPD - AdviserVoice Fri, 02 Oct 2026 01:23:19 +0000 en-US hourly 1 https://wordpress.org/?v=7.1.2 CPD: The case for shareholder yield in client portfolios https://www.adviservoice.com.au/2026/10/cpd-the-case-for-shareholder-yield-in-client-portfolios/ https://www.adviservoice.com.au/2026/10/cpd-the-case-for-shareholder-yield-in-client-portfolios/#respond Wed, 30 Sep 2026 21:25:40 +0000 https://www.adviservoice.com.au/?p=114105

The three components of shareholder yield – dividends, buybacks and debt reduction – are best thought of collectively rather than in isolation.

For years, income-focused investors have leaned on a familiar approach: find companies with high dividend yields and hold them. It is a reasonable starting point, but it is an incomplete one. Strong equity markets have compressed dividend yields in many parts of the world, and investors who look narrowly at dividends alone are missing a large part of how companies actually return value to shareholders.

Shareholder yield is a broader framework. It looks at the ways a company returns cash, not just dividends, and it asks a more useful question than “what is the yield today”. It asks whether a company can sustain and grow its total distributions over time. For advisers building income and growth portfolios for clients navigating volatility, rate uncertainty and a market increasingly concentrated in a small number of large companies, that is a distinction worth understanding and worth explaining to your clients.

The holy trinity: dividends, share buybacks and debt reduction

The three components of shareholder yield – dividends, buybacks and debt reduction – are best thought of collectively rather than in isolation. The key question is not which lever is most attractive, but whether the underlying free cash flow can sustain and grow total distributions over time. In today’s environment, TD Epoch sees encouraging trends across all three.

Shareholder yield measures the total cash a company returns to its investors, combining dividends, share buybacks and debt reduction into a single figure. TD Epoch, whose investment philosophy centres on free cash flow as the best predictor of shareholder return, argues that the way management allocates that cash flow determines whether a business rises or falls in value.

Dividends remain a core component of return and continue to anchor investor expectations. At the same time, share buybacks have become more prevalent as companies deploy excess cash in a flexible way, particularly where balance sheets are strong. Debt reduction has also taken on greater importance, as higher interest rates incentivise companies to strengthen their balance sheets. What stands out most is the increasing discipline in capital allocation decisions, particularly among large, mature companies.

Dividends are the most familiar channel and remain a core anchor of investor expectations. A company that pays a dividend, particularly one that grows it consistently, is signalling confidence in its future cash generation and a commitment to sharing that with shareholders.

Share buybacks work differently but achieve a similar outcome. When a company repurchases its own shares, the number of shares outstanding falls, which increases the value attributable to each remaining share. Like a dividend, this transfers value to shareholders, just through a different mechanism. Buybacks have become more prevalent as companies with strong balance sheets look for flexible ways to deploy excess cash, particularly in environments where certainty about future capital needs is lower than usual.

Debt reduction is the least obvious of the three but fits the same logic. When a company uses free cash flow to pay down debt rather than distribute it, it reduces interest costs, improves future earnings and strengthens its balance sheet. This effectively shifts value from creditors to equity holders, because there are fewer future claims on the company’s cash flows. Shareholders do not receive cash immediately, but they benefit through higher earnings available to them later. Debt reduction has taken on added importance in a higher rate environment, where companies have a clearer financial incentive to reduce leverage.

Framed this way, shareholder yield is less an income metric and more a capital allocation question. It asks whether management is generating sustainable free cash flow and using it in ways that build long-term value for the people who own the business – the shareholders.

Companies with strong shareholder yield typically have management teams focused on creating value through consistent and rational capital allocation. Rather than looking at dividend yield alone, shareholder yield gives a fuller picture of how a company treats its shareholders financially and can point to businesses generating the kind of cash flow that supports sustainable returns over time.

TD Epoch believes the current environment is constructive for shareholder yield investing. Elevated volatility, geopolitical uncertainty and shifting rate expectations have created greater dispersion across sectors, which tends to reward a bottom up, cash-flow-driven approach. In that context, companies with sustainable free cash flow and a track record of returning capital to shareholders have historically been able to deliver relatively resilient results. The firm has also seen a broadening of market participation beyond a narrow set of leaders, which may support a more diversified yield opportunity set.

That said, challenges remain. Strong market performance in recent years has compressed dividend yields in parts of the market, making income harder to source if one looks narrowly at dividends. At the same time, certain segments, such as those driven by long-term growth expectations, continue to be influenced more by sentiment than by near-term cash generation.

Why dividend yield alone is an incomplete measure

Historically, the main drivers of equity market returns can be broken down into three components: earnings per share growth, dividends and changes in valuation multiples such as the price-to-earnings ratio (figure one). Of these three, valuation changes have tended to expand and contract over time without contributing much to total return over the longer term. The bulk of long-term return has instead come from earnings growth, with dividends providing a smaller but consistently positive contribution.

It is worth noting that the contribution from dividends has declined somewhat since the early 1990s. This is not because companies have become less generous to shareholders. It largely reflects a regulatory shift in the United States that made share buybacks a more tax-efficient way of returning cash than dividends. Buybacks became a substitute channel for capital return rather than a sign that companies were retaining more cash for themselves. They still drive earnings per share growth and still represent a genuine transfer of value to shareholders, even though they do not appear in a traditional dividend yield figure.

This perception matters. A company with a modest or non-existent dividend is not automatically a poor candidate for an income or total-return-oriented allocation. If that same company is consistently buying back shares or paying down debt from a strong base of free cash flow, it may be delivering shareholder yield that a headline dividend figure does not capture at all.

The opportunity set is broader than it looks

There is a common assumption that yield only lives in a narrow set of traditional, defensive sectors such as utilities, banks, telecommunications and real estate investment trusts. That assumption can lead investors to overlook a large and growing part of the market.

Many companies outside these traditional income sectors have matured into highly cash-generative businesses with strong margins and recurring revenue. As these companies mature, capital allocation priorities often shift, with a greater willingness to return cash to shareholders through dividends and buybacks, alongside continued reinvestment in growth. A company can combine structural growth drivers with meaningful cash returns. These are not competing priorities.

It also helps to look within sectors rather than treating them as uniform. Healthcare is a useful example. A biotechnology company focused purely on research and development may have little or no capacity to return cash to shareholders, because most of its free cash flow, where it exists at all, needs to be reinvested. Compare that with a large, diversified pharmaceutical company with strong recurring cash flow; such companies may be able to fund ongoing research and development while also paying a growing dividend and buying back shares. Both are technically in the same sector; however, their shareholder yield profiles are entirely different.

This is one of the practical strengths of a shareholder yield approach to portfolio construction. Because it starts from free cash flow generation and capital discipline rather than sector classification, it naturally leads to a more diversified set of opportunities than a screen built purely around current dividend yield. Innovation, scale and competitive position drive strong cash flow across many parts of the market, not just the traditionally defensive sectors.

This broader opportunity set has practical benefits for portfolio construction. A dividend yield screen applied narrowly tends to concentrate a portfolio in a relatively small number of sectors, often financials, utilities and real estate, which leaves the portfolio exposed to whatever affects those sectors specifically, such as interest rate movements or regulatory change.

A shareholder yield approach that considers the full range of capital return channels, one that looks across sectors for genuine free cash flow generation, tends to spread that exposure more evenly. For investors, this can mean a portfolio that is earning its income and total return from a wider range of underlying business drivers, rather than depending heavily on the fortunes of one or two industries.

Broadening the opportunity set does not mean lowering the bar. The same discipline around sustainable free cash flow and consistent capital return applies whether the company in question is a bank, a packaging manufacturer or a mature technology business. The point is not that yield can be found everywhere in equal measure, but that it should not be assumed to be absent from sectors that do not fit the traditional income mould.

How to identify genuine, sustainable yield

Finding companies capable of sustaining and growing shareholder yield requires looking past headline numbers. The first question is: where the cash flow is coming from? Is it generated from a reliable, recurring source of revenue, or does it depend on one-off items that are unlikely to repeat? A company whose cash flow comes from genuine revenue growth is in a fundamentally different position to one whose cash flow improvement is driven mainly by cost-cutting. Both can look similar in the short term. Only the first tends to support cash flow growth over the long term.

The second question is how management is allocating that cash. If a company can reinvest in the business or make acquisitions at returns above its cost of capital, it should generally be doing so, because that is how it compounds value over time. But profitable reinvestment opportunities are not unlimited. When a company cannot find them, the more disciplined path is to return the surplus cash to shareholders through dividends, buybacks or debt reduction, rather than pursuing growth for its own sake.

This is why free cash flow analysis tends to be a more reliable foundation for assessing sustainability than accounting-based metrics like price-to-earnings or price-to-book. Those multiples can be influenced by accounting choices in ways that free cash flow, which reflects actual cash generated and actual cash distributed, is harder to manipulate.

In practical terms, advisers assessing a company or a strategy built around shareholder yield should look for a track record of consistent or growing dividends, evidence of management’s ongoing commitment to returning capital rather than a one-off distribution, as well as cash flow growth that is underpinned by revenue rather than by cost reduction alone. Consistency of behaviour across market cycles is often as informative as the current yield figure itself.

Capital intensity is another factor worth weighing. A company that needs to reinvest heavily in plant, equipment or inventory just to maintain its current level of business will naturally have less free cash flow available for shareholders, even if its reported earnings look healthy.

Businesses with lower ongoing capital needs, relative to the cash they generate, tend to have more flexibility to fund dividends, buybacks and debt reduction simultaneously, rather than having to choose between them. This is part of why service-based and recurring-revenue businesses, where the incremental cost of serving an existing customer is relatively low, often screen well on shareholder yield measures once they reach a mature stage of growth.

It is also worth distinguishing between a company that is returning cash because it has genuinely run out of better uses for it, and one that is returning cash because management has stopped looking for growth. The first is a sign of discipline. The second can be a sign of a business in decline, propping up its share price with buybacks while the underlying franchise erodes. Reviewing whether revenue and market share are stable or growing, alongside the capital return numbers, helps separate the two.

Yield traps: what to watch for

Not every high yield is a good yield. In some cases, elevated yield is a warning sign rather than an opportunity, and this is one of the more important concepts for advisers to be able to explain to clients who are drawn to headline numbers.

The most common warning sign is a disconnect between the yield on offer and the underlying fundamentals of the business. A high dividend that is not supported by sustainable free cash flow is fragile. Deteriorating cash flow, excessive leverage and capital allocation decisions that favour short-term payouts over the long-term health of the business are red flags worth investigating.

A particularly common trap is a rising yield that is driven by a falling share price rather than by a rising payout. Dividend yield is a ratio, so it rises automatically as a share price falls, even if the dividend itself is unchanged or under pressure. A yield that looks attractive purely because the market has marked the shares down deserves closer scrutiny, not less. The relevant question is always whether the company has the capacity to maintain and grow its distributions, not simply what the current yield happens to be.

This is another reason free cash flow discipline matters more than the yield figure in isolation. A sustainable yield is one supported by a business that continues to generate the cash needed to fund it, through good conditions and more difficult ones.

The portfolio construction case

Beyond the merits of individual companies, there is a case for shareholder yield as a portfolio-level strategy, particularly in the market environment your clients are currently navigating.

Companies that generate sustainable free cash flow and have a track record of returning capital to shareholders have historically tended to deliver more resilient results through periods of volatility. A business funding consistent distributions from recurring cash flow is one with a degree of underlying stability. That stability tends to show up in lower volatility of returns over time, alongside the more visible benefit of income.

This makes a shareholder yield approach useful as a total return framework, not simply a defensive or income-only allocation. It does not rely on valuation multiples expanding; this is an unpredictable measure which, over long periods, contributes relatively little to total return as illustrated in figure one. Instead, a shareholder yield approach emphasises the components of return that are more observable and durable: cash flow growth and disciplined capital allocation. Investors following this framework can participate in equity market upside while also benefiting from a degree of downside resilience when conditions deteriorate.

For Australian investors in particular, this framing is relevant against a backdrop of tariff and trade policy uncertainty, shifting interest rate expectations, geopolitical risk and a market where much of the recent return has been concentrated in a narrow set of very large companies. A broader, cash-flow-driven approach to yield offers a way to keep clients invested in equities for growth, while managing some of the risk that comes with that concentration.

This is a particularly relevant conversation for retirees and pre-retirees who need income but cannot afford to sacrifice growth exposure entirely. The spectre of ongoing inflation and the reality of longevity risk both argue against allocating too much of a portfolio in low-growth assets.

Yield is broader than the number printed next to a dividend. Dividends, share buybacks and debt reduction are three different mechanisms for the same underlying idea, a company returning the cash it generates to the people who own it. Free cash flow is the thread that connects all three, and it is a more reliable guide to sustainability than a current dividend yield figure on its own.

For advisers, shareholder yield offers a good framework to talk to clients about income, particularly in a market where dividend yields have been compressed and where the appeal of a high headline yield can mask real underlying risk. By focusing on companies that generate and return cash, TD Epoch believes investors can participate in equity upside while also benefiting from a degree of downside resilience. In today’s more uncertain environment, a combination of participation and resilience is particularly valuable, helping investors stay invested and compound returns over full market cycles.

The information included in this article is provided for informational purposes only and is general advice only. It does not take into account an investor’s own objectives. The information contained in this article reflects, as of the date of publication, the current opinion of TD Epoch and is subject to change without notice. Sources for the material contained in this article are deemed reliable but cannot be guaranteed. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our judgment at this date, are subject to change and should not be relied upon as the basis of your investment decisions. All reasonable care has been taken in producing the information set out in this article however subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information. Neither TD Epoch, GSFM Pty Ltd, their related bodies nor associates gives any warranty nor makes any representation nor accepts responsibility for the accuracy or completeness of the information contained in this article.

 

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The three components of shareholder yield – dividends, buybacks and debt reduction – are best thought of collectively rather than in isolation.

For years, income-focused investors have leaned on a familiar approach: find companies with high dividend yields and hold them. It is a reasonable starting point, but it is an incomplete one. Strong equity markets have compressed dividend yields in many parts of the world, and investors who look narrowly at dividends alone are missing a large part of how companies actually return value to shareholders.

Shareholder yield is a broader framework. It looks at the ways a company returns cash, not just dividends, and it asks a more useful question than “what is the yield today”. It asks whether a company can sustain and grow its total distributions over time. For advisers building income and growth portfolios for clients navigating volatility, rate uncertainty and a market increasingly concentrated in a small number of large companies, that is a distinction worth understanding and worth explaining to your clients.

The holy trinity: dividends, share buybacks and debt reduction

The three components of shareholder yield – dividends, buybacks and debt reduction – are best thought of collectively rather than in isolation. The key question is not which lever is most attractive, but whether the underlying free cash flow can sustain and grow total distributions over time. In today’s environment, TD Epoch sees encouraging trends across all three.

Shareholder yield measures the total cash a company returns to its investors, combining dividends, share buybacks and debt reduction into a single figure. TD Epoch, whose investment philosophy centres on free cash flow as the best predictor of shareholder return, argues that the way management allocates that cash flow determines whether a business rises or falls in value.

Dividends remain a core component of return and continue to anchor investor expectations. At the same time, share buybacks have become more prevalent as companies deploy excess cash in a flexible way, particularly where balance sheets are strong. Debt reduction has also taken on greater importance, as higher interest rates incentivise companies to strengthen their balance sheets. What stands out most is the increasing discipline in capital allocation decisions, particularly among large, mature companies.

Dividends are the most familiar channel and remain a core anchor of investor expectations. A company that pays a dividend, particularly one that grows it consistently, is signalling confidence in its future cash generation and a commitment to sharing that with shareholders.

Share buybacks work differently but achieve a similar outcome. When a company repurchases its own shares, the number of shares outstanding falls, which increases the value attributable to each remaining share. Like a dividend, this transfers value to shareholders, just through a different mechanism. Buybacks have become more prevalent as companies with strong balance sheets look for flexible ways to deploy excess cash, particularly in environments where certainty about future capital needs is lower than usual.

Debt reduction is the least obvious of the three but fits the same logic. When a company uses free cash flow to pay down debt rather than distribute it, it reduces interest costs, improves future earnings and strengthens its balance sheet. This effectively shifts value from creditors to equity holders, because there are fewer future claims on the company’s cash flows. Shareholders do not receive cash immediately, but they benefit through higher earnings available to them later. Debt reduction has taken on added importance in a higher rate environment, where companies have a clearer financial incentive to reduce leverage.

Framed this way, shareholder yield is less an income metric and more a capital allocation question. It asks whether management is generating sustainable free cash flow and using it in ways that build long-term value for the people who own the business – the shareholders.

Companies with strong shareholder yield typically have management teams focused on creating value through consistent and rational capital allocation. Rather than looking at dividend yield alone, shareholder yield gives a fuller picture of how a company treats its shareholders financially and can point to businesses generating the kind of cash flow that supports sustainable returns over time.

TD Epoch believes the current environment is constructive for shareholder yield investing. Elevated volatility, geopolitical uncertainty and shifting rate expectations have created greater dispersion across sectors, which tends to reward a bottom up, cash-flow-driven approach. In that context, companies with sustainable free cash flow and a track record of returning capital to shareholders have historically been able to deliver relatively resilient results. The firm has also seen a broadening of market participation beyond a narrow set of leaders, which may support a more diversified yield opportunity set.

That said, challenges remain. Strong market performance in recent years has compressed dividend yields in parts of the market, making income harder to source if one looks narrowly at dividends. At the same time, certain segments, such as those driven by long-term growth expectations, continue to be influenced more by sentiment than by near-term cash generation.

Why dividend yield alone is an incomplete measure

Historically, the main drivers of equity market returns can be broken down into three components: earnings per share growth, dividends and changes in valuation multiples such as the price-to-earnings ratio (figure one). Of these three, valuation changes have tended to expand and contract over time without contributing much to total return over the longer term. The bulk of long-term return has instead come from earnings growth, with dividends providing a smaller but consistently positive contribution.

It is worth noting that the contribution from dividends has declined somewhat since the early 1990s. This is not because companies have become less generous to shareholders. It largely reflects a regulatory shift in the United States that made share buybacks a more tax-efficient way of returning cash than dividends. Buybacks became a substitute channel for capital return rather than a sign that companies were retaining more cash for themselves. They still drive earnings per share growth and still represent a genuine transfer of value to shareholders, even though they do not appear in a traditional dividend yield figure.

This perception matters. A company with a modest or non-existent dividend is not automatically a poor candidate for an income or total-return-oriented allocation. If that same company is consistently buying back shares or paying down debt from a strong base of free cash flow, it may be delivering shareholder yield that a headline dividend figure does not capture at all.

The opportunity set is broader than it looks

There is a common assumption that yield only lives in a narrow set of traditional, defensive sectors such as utilities, banks, telecommunications and real estate investment trusts. That assumption can lead investors to overlook a large and growing part of the market.

Many companies outside these traditional income sectors have matured into highly cash-generative businesses with strong margins and recurring revenue. As these companies mature, capital allocation priorities often shift, with a greater willingness to return cash to shareholders through dividends and buybacks, alongside continued reinvestment in growth. A company can combine structural growth drivers with meaningful cash returns. These are not competing priorities.

It also helps to look within sectors rather than treating them as uniform. Healthcare is a useful example. A biotechnology company focused purely on research and development may have little or no capacity to return cash to shareholders, because most of its free cash flow, where it exists at all, needs to be reinvested. Compare that with a large, diversified pharmaceutical company with strong recurring cash flow; such companies may be able to fund ongoing research and development while also paying a growing dividend and buying back shares. Both are technically in the same sector; however, their shareholder yield profiles are entirely different.

This is one of the practical strengths of a shareholder yield approach to portfolio construction. Because it starts from free cash flow generation and capital discipline rather than sector classification, it naturally leads to a more diversified set of opportunities than a screen built purely around current dividend yield. Innovation, scale and competitive position drive strong cash flow across many parts of the market, not just the traditionally defensive sectors.

This broader opportunity set has practical benefits for portfolio construction. A dividend yield screen applied narrowly tends to concentrate a portfolio in a relatively small number of sectors, often financials, utilities and real estate, which leaves the portfolio exposed to whatever affects those sectors specifically, such as interest rate movements or regulatory change.

A shareholder yield approach that considers the full range of capital return channels, one that looks across sectors for genuine free cash flow generation, tends to spread that exposure more evenly. For investors, this can mean a portfolio that is earning its income and total return from a wider range of underlying business drivers, rather than depending heavily on the fortunes of one or two industries.

Broadening the opportunity set does not mean lowering the bar. The same discipline around sustainable free cash flow and consistent capital return applies whether the company in question is a bank, a packaging manufacturer or a mature technology business. The point is not that yield can be found everywhere in equal measure, but that it should not be assumed to be absent from sectors that do not fit the traditional income mould.

How to identify genuine, sustainable yield

Finding companies capable of sustaining and growing shareholder yield requires looking past headline numbers. The first question is: where the cash flow is coming from? Is it generated from a reliable, recurring source of revenue, or does it depend on one-off items that are unlikely to repeat? A company whose cash flow comes from genuine revenue growth is in a fundamentally different position to one whose cash flow improvement is driven mainly by cost-cutting. Both can look similar in the short term. Only the first tends to support cash flow growth over the long term.

The second question is how management is allocating that cash. If a company can reinvest in the business or make acquisitions at returns above its cost of capital, it should generally be doing so, because that is how it compounds value over time. But profitable reinvestment opportunities are not unlimited. When a company cannot find them, the more disciplined path is to return the surplus cash to shareholders through dividends, buybacks or debt reduction, rather than pursuing growth for its own sake.

This is why free cash flow analysis tends to be a more reliable foundation for assessing sustainability than accounting-based metrics like price-to-earnings or price-to-book. Those multiples can be influenced by accounting choices in ways that free cash flow, which reflects actual cash generated and actual cash distributed, is harder to manipulate.

In practical terms, advisers assessing a company or a strategy built around shareholder yield should look for a track record of consistent or growing dividends, evidence of management’s ongoing commitment to returning capital rather than a one-off distribution, as well as cash flow growth that is underpinned by revenue rather than by cost reduction alone. Consistency of behaviour across market cycles is often as informative as the current yield figure itself.

Capital intensity is another factor worth weighing. A company that needs to reinvest heavily in plant, equipment or inventory just to maintain its current level of business will naturally have less free cash flow available for shareholders, even if its reported earnings look healthy.

Businesses with lower ongoing capital needs, relative to the cash they generate, tend to have more flexibility to fund dividends, buybacks and debt reduction simultaneously, rather than having to choose between them. This is part of why service-based and recurring-revenue businesses, where the incremental cost of serving an existing customer is relatively low, often screen well on shareholder yield measures once they reach a mature stage of growth.

It is also worth distinguishing between a company that is returning cash because it has genuinely run out of better uses for it, and one that is returning cash because management has stopped looking for growth. The first is a sign of discipline. The second can be a sign of a business in decline, propping up its share price with buybacks while the underlying franchise erodes. Reviewing whether revenue and market share are stable or growing, alongside the capital return numbers, helps separate the two.

Yield traps: what to watch for

Not every high yield is a good yield. In some cases, elevated yield is a warning sign rather than an opportunity, and this is one of the more important concepts for advisers to be able to explain to clients who are drawn to headline numbers.

The most common warning sign is a disconnect between the yield on offer and the underlying fundamentals of the business. A high dividend that is not supported by sustainable free cash flow is fragile. Deteriorating cash flow, excessive leverage and capital allocation decisions that favour short-term payouts over the long-term health of the business are red flags worth investigating.

A particularly common trap is a rising yield that is driven by a falling share price rather than by a rising payout. Dividend yield is a ratio, so it rises automatically as a share price falls, even if the dividend itself is unchanged or under pressure. A yield that looks attractive purely because the market has marked the shares down deserves closer scrutiny, not less. The relevant question is always whether the company has the capacity to maintain and grow its distributions, not simply what the current yield happens to be.

This is another reason free cash flow discipline matters more than the yield figure in isolation. A sustainable yield is one supported by a business that continues to generate the cash needed to fund it, through good conditions and more difficult ones.

The portfolio construction case

Beyond the merits of individual companies, there is a case for shareholder yield as a portfolio-level strategy, particularly in the market environment your clients are currently navigating.

Companies that generate sustainable free cash flow and have a track record of returning capital to shareholders have historically tended to deliver more resilient results through periods of volatility. A business funding consistent distributions from recurring cash flow is one with a degree of underlying stability. That stability tends to show up in lower volatility of returns over time, alongside the more visible benefit of income.

This makes a shareholder yield approach useful as a total return framework, not simply a defensive or income-only allocation. It does not rely on valuation multiples expanding; this is an unpredictable measure which, over long periods, contributes relatively little to total return as illustrated in figure one. Instead, a shareholder yield approach emphasises the components of return that are more observable and durable: cash flow growth and disciplined capital allocation. Investors following this framework can participate in equity market upside while also benefiting from a degree of downside resilience when conditions deteriorate.

For Australian investors in particular, this framing is relevant against a backdrop of tariff and trade policy uncertainty, shifting interest rate expectations, geopolitical risk and a market where much of the recent return has been concentrated in a narrow set of very large companies. A broader, cash-flow-driven approach to yield offers a way to keep clients invested in equities for growth, while managing some of the risk that comes with that concentration.

This is a particularly relevant conversation for retirees and pre-retirees who need income but cannot afford to sacrifice growth exposure entirely. The spectre of ongoing inflation and the reality of longevity risk both argue against allocating too much of a portfolio in low-growth assets.

Yield is broader than the number printed next to a dividend. Dividends, share buybacks and debt reduction are three different mechanisms for the same underlying idea, a company returning the cash it generates to the people who own it. Free cash flow is the thread that connects all three, and it is a more reliable guide to sustainability than a current dividend yield figure on its own.

For advisers, shareholder yield offers a good framework to talk to clients about income, particularly in a market where dividend yields have been compressed and where the appeal of a high headline yield can mask real underlying risk. By focusing on companies that generate and return cash, TD Epoch believes investors can participate in equity upside while also benefiting from a degree of downside resilience. In today’s more uncertain environment, a combination of participation and resilience is particularly valuable, helping investors stay invested and compound returns over full market cycles.

The information included in this article is provided for informational purposes only and is general advice only. It does not take into account an investor’s own objectives. The information contained in this article reflects, as of the date of publication, the current opinion of TD Epoch and is subject to change without notice. Sources for the material contained in this article are deemed reliable but cannot be guaranteed. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our judgment at this date, are subject to change and should not be relied upon as the basis of your investment decisions. All reasonable care has been taken in producing the information set out in this article however subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information. Neither TD Epoch, GSFM Pty Ltd, their related bodies nor associates gives any warranty nor makes any representation nor accepts responsibility for the accuracy or completeness of the information contained in this article.

 

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]]> https://www.adviservoice.com.au/2026/10/cpd-the-case-for-shareholder-yield-in-client-portfolios/feed/ 0 Is a 5 per cent US 10-year bond yield the new normal? https://www.adviservoice.com.au/2026/09/is-a-5-per-cent-us-10-year-bond-yield-the-new-normal/ https://www.adviservoice.com.au/2026/09/is-a-5-per-cent-us-10-year-bond-yield-the-new-normal/#respond Thu, 24 Sep 2026 21:30:17 +0000 https://www.adviservoice.com.au/?p=114219

Stephen Miller

The US 10-year bond yield is above 5 per cent. Apart from a fleeting period (less than a day) in October 2023, the last time that US 10-year yields were in this sort of territory was in June 2007.

But is the 10-year bond yield “high”? II’m not so sure.

In the first instance rising bond yields were a response to a toxic cocktail; relatively high and “sticky” inflation (exacerbated by high oil prices in the wake of the Iranian conflict); record “peacetime” US budget deficits and consequent record government debt levels against a backdrop of virtually full employment; declining demand for US bonds from official sources as the US takes a more adversarial tone in its geopolitical and commercial international relations; competing issuance from hyperscalers to fund massive AI related capex; and question marks around the independence of the US Federal Reserve.

Certain elements of that toxic cocktail are in abeyance (Fed independence). But others persist.

Some may argue that the bad news is more than adequately reflected in a US 10-year bond yield above 5 per cent. I’m not so sure.

Others may point to the possibility of resort to financial repression (official measures to suppress bond yields). Treasury Secretary Scott Bessent’s recent attempt looks unsuccessful but there might be more to play out on that front.

So, is it time to overweight bonds in a multi-asset portfolio?

Maybe, but I retain a healthy scepticism.

First, the toxicity of the cocktail nor its durability should not be underestimated.

Oil prices are elevated and inflation remains stubbornly “sticky”. There is the notion that higher oil prices are yet to be reflected in broader inflation measures.

The US budget deficit does not seem likely to shrink in the near future (witness President Trump’s promise of $US5000 to every US adult if the Republicans win the mid-terms).

Demand for US government bonds from official sources (mostly foreign central banks) has inevitably declined. It is clear why the central banks of potential adversaries like China will continue to reduce exposure to the USD and US government bonds. However, given President Trump’s somewhat capricious treatment of allies, developed country central banks may also explore diversification of their foreign exchange reserves, a la Norway.

Hyperscalers continue to issue debt to fund the massive capex requirements associated with the AI boom.

Another element at play is that US monetary policy and, indeed, broader financial conditions may not be that restrictive.

Fed Chair Warsh has openly canvassed this question.

That implies that current bond yields may not be extraordinarily high.

Between 2008 and 2022 (the period covering from the GFC to the pandemic) US 10-year bond yields averaged around 2.4 per cent. The “real” yield (nominal yield less 12-month core CPI inflation) was close to 0.1 per cent.

That was a period of extraordinarily low yields by historical standards. Yet it is etched in the minds of a number of market participants as some benchmark of “normality”.

Between 2000 and 2007 the average US 10-year bond yield was around 4.7 per cent while the real yield was around 2.5 per cent. These were not that different from averages during the 1960s (4.7 per cent and 2.2 per cent respectively).

The latter are arguably a better benchmark than that which prevailed between the GFC and the end of the pandemic.

The current figures are close to 5.1 per cent and 2.6 per cent respectively. That is in the ballpark of periods outside that book-ended by the GFC and the Pandemic.

Current nominal and real 10-year yields are probably a tad higher than long-run “steady state” nominal and real GDP growth rates. In other words, compared with r* (the long run “steady state” 10-year bond yield), the current 10-year bond yield is maybe a little on the high side. A substantial productivity dividend from AI would likely increase r* making current levels more “normal”.

And there is that the aforementioned toxic cocktail.

There are other considerations that attach to bonds in the context of a multi-asset portfolio.

It has become clear that any assumed negative return correlation between equities and bonds is highly contingent on a low and stable inflation rate. Such an environment gives central banks the wherewithal to address the consequences of a downdraft in equity markets with an aggressive reduction in the policy rate and attendant lower bond yields.

The higher inflation environment that emerged from the pandemic has rendered the negative return equity/bond correlation assumption as no longer useful.

Investors need to think about augmenting traditional multi-asset portfolios with strategic allocations to asset classes that are not as correlated with equity returns and which have some inflation protection qualities.

Certainly, infrastructure and commodities are appealing in this regard. Not only are they less correlated to equity and bond returns but they have desirable inflation protection qualities (although the Australian equity market may exhibit some positive correlation with certain commodities). Trend following quantitative portfolios also fill a similar role.

So, a 10-year bond yield above 5 per cent may well be the new normal. Macro conditions remain problematic (“sticky inflation, oil prices, US budget deficit, hyperscaler issuance etc.); bond yields are not particularly high versus historical benchmarks and compared to r*; and bonds are not as effective a diversifier to equities as they may have once been.

RBA: need to go higher

At the time, I described the August decision by the Reserve Bank of Australia (RBA) Monetary Policy Board (MPB) to leave the policy rate unchanged as “defensible but contestable”.

In essence the Board at the August meeting, ceded the argument that increases in the policy rate so far this year are working to contain inflation, and with activity growth tepid, the balance of risks pointed to no need to increase the policy rate at the August meeting.

That the decision was not without risk was exemplified by the reality that inflation pressures in Australia are among the highest in the developed world. That reflects the uncomfortable circumstance of a homegrown structural inflation proclivity.

That some Board members were cognisant of those homegrown inflation risks seemed to be made clear in the minutes of the August meeting which canvassed the potential requirement to increase the policy rate should upside inflation risks materialise.

The July consumer price index (CPI) report brought those upside risks into stark relief.

Indeed, the July report makes it is hard to construct a narrative around declining inflation. The annual rate of increase is stuck at 3.6 per cent. Perhaps even more worrying the annualised 6-monthly rate of increase is at 3.9 per cent. That is the highest in the (admittedly short history) of the published monthly series.

The July report led RBA governor Michele Bullock to tell a parliamentary inquiry last week that the risks of inflation continuing to rise were “materialising”.

What is more, “sticky” inflation must cast some doubt on the prevailing RBA (and financial market consensus) narrative that monetary policy is restrictive. A “real” policy rate of somewhere around ½ – ¾ per cent does not strike me as particularly restrictive.

I have noted in the past that Australia’s poor relative inflation performance stems from abject productivity growth which makes the task of inflation containment all the harder, necessitating higher policy rates. That abject productivity growth reflects, inter alia, the interplay of regulatory creep in labour and goods markets. Regulatory creep also imposes costs on businesses, part of which are passed on to consumers, giving further impetus to price pressures.

In the absence of a meaningful deterioration in the labour market, I strongly suspect that the RBA will be required to raise the policy rate again at its September meeting.

Moreover, at this stage meetings beyond September must be considered “live”, even if the RBA were to raise the policy rate in September.

That may be the “least worse” path even in the event of a cooling labour market.

In the wake of the oil shocks of the 1970s, developed country central banks’ big mistake was a premature retreat from an inflation focus. That “let the inflation genie out of the bottle” and resulted in the painful, but necessarily harsh Volcker medicine of the late 1970s / early 1980s.

I am not suggesting that the current circumstance is one that is anywhere near quantitatively on a par with 1970s. But there are elements that are redolent of that time, albeit on a substantially reduced scale.

The RBA’s mandate has both an inflation and employment objective. Yet the RBA has only one instrument – monetary policy – at its disposal. Trying to target two variables with one instrument is nigh on impossible as any economics undergraduate with even cursory knowledge of the Tinbergen Rule will tell you.

In his Jackson Hole remarks, Warsh noted that the Fed also has a mandate for maximum employment. He added that achieving both sides of that mandate does not mean that monetary policy works at cross-purposes since high inflation itself is very harmful to economic prosperity.

Maybe the best the RBA can do to ensure maximum employment in the medium-term is to ensure a low and stable rate of inflation.

And that is why it must increase the policy rate at the end of the month and maybe beyond.

By Stephen Miller, investment strategist

]]>

Stephen Miller

The US 10-year bond yield is above 5 per cent. Apart from a fleeting period (less than a day) in October 2023, the last time that US 10-year yields were in this sort of territory was in June 2007.

But is the 10-year bond yield “high”? II’m not so sure.

In the first instance rising bond yields were a response to a toxic cocktail; relatively high and “sticky” inflation (exacerbated by high oil prices in the wake of the Iranian conflict); record “peacetime” US budget deficits and consequent record government debt levels against a backdrop of virtually full employment; declining demand for US bonds from official sources as the US takes a more adversarial tone in its geopolitical and commercial international relations; competing issuance from hyperscalers to fund massive AI related capex; and question marks around the independence of the US Federal Reserve.

Certain elements of that toxic cocktail are in abeyance (Fed independence). But others persist.

Some may argue that the bad news is more than adequately reflected in a US 10-year bond yield above 5 per cent. I’m not so sure.

Others may point to the possibility of resort to financial repression (official measures to suppress bond yields). Treasury Secretary Scott Bessent’s recent attempt looks unsuccessful but there might be more to play out on that front.

So, is it time to overweight bonds in a multi-asset portfolio?

Maybe, but I retain a healthy scepticism.

First, the toxicity of the cocktail nor its durability should not be underestimated.

Oil prices are elevated and inflation remains stubbornly “sticky”. There is the notion that higher oil prices are yet to be reflected in broader inflation measures.

The US budget deficit does not seem likely to shrink in the near future (witness President Trump’s promise of $US5000 to every US adult if the Republicans win the mid-terms).

Demand for US government bonds from official sources (mostly foreign central banks) has inevitably declined. It is clear why the central banks of potential adversaries like China will continue to reduce exposure to the USD and US government bonds. However, given President Trump’s somewhat capricious treatment of allies, developed country central banks may also explore diversification of their foreign exchange reserves, a la Norway.

Hyperscalers continue to issue debt to fund the massive capex requirements associated with the AI boom.

Another element at play is that US monetary policy and, indeed, broader financial conditions may not be that restrictive.

Fed Chair Warsh has openly canvassed this question.

That implies that current bond yields may not be extraordinarily high.

Between 2008 and 2022 (the period covering from the GFC to the pandemic) US 10-year bond yields averaged around 2.4 per cent. The “real” yield (nominal yield less 12-month core CPI inflation) was close to 0.1 per cent.

That was a period of extraordinarily low yields by historical standards. Yet it is etched in the minds of a number of market participants as some benchmark of “normality”.

Between 2000 and 2007 the average US 10-year bond yield was around 4.7 per cent while the real yield was around 2.5 per cent. These were not that different from averages during the 1960s (4.7 per cent and 2.2 per cent respectively).

The latter are arguably a better benchmark than that which prevailed between the GFC and the end of the pandemic.

The current figures are close to 5.1 per cent and 2.6 per cent respectively. That is in the ballpark of periods outside that book-ended by the GFC and the Pandemic.

Current nominal and real 10-year yields are probably a tad higher than long-run “steady state” nominal and real GDP growth rates. In other words, compared with r* (the long run “steady state” 10-year bond yield), the current 10-year bond yield is maybe a little on the high side. A substantial productivity dividend from AI would likely increase r* making current levels more “normal”.

And there is that the aforementioned toxic cocktail.

There are other considerations that attach to bonds in the context of a multi-asset portfolio.

It has become clear that any assumed negative return correlation between equities and bonds is highly contingent on a low and stable inflation rate. Such an environment gives central banks the wherewithal to address the consequences of a downdraft in equity markets with an aggressive reduction in the policy rate and attendant lower bond yields.

The higher inflation environment that emerged from the pandemic has rendered the negative return equity/bond correlation assumption as no longer useful.

Investors need to think about augmenting traditional multi-asset portfolios with strategic allocations to asset classes that are not as correlated with equity returns and which have some inflation protection qualities.

Certainly, infrastructure and commodities are appealing in this regard. Not only are they less correlated to equity and bond returns but they have desirable inflation protection qualities (although the Australian equity market may exhibit some positive correlation with certain commodities). Trend following quantitative portfolios also fill a similar role.

So, a 10-year bond yield above 5 per cent may well be the new normal. Macro conditions remain problematic (“sticky inflation, oil prices, US budget deficit, hyperscaler issuance etc.); bond yields are not particularly high versus historical benchmarks and compared to r*; and bonds are not as effective a diversifier to equities as they may have once been.

RBA: need to go higher

At the time, I described the August decision by the Reserve Bank of Australia (RBA) Monetary Policy Board (MPB) to leave the policy rate unchanged as “defensible but contestable”.

In essence the Board at the August meeting, ceded the argument that increases in the policy rate so far this year are working to contain inflation, and with activity growth tepid, the balance of risks pointed to no need to increase the policy rate at the August meeting.

That the decision was not without risk was exemplified by the reality that inflation pressures in Australia are among the highest in the developed world. That reflects the uncomfortable circumstance of a homegrown structural inflation proclivity.

That some Board members were cognisant of those homegrown inflation risks seemed to be made clear in the minutes of the August meeting which canvassed the potential requirement to increase the policy rate should upside inflation risks materialise.

The July consumer price index (CPI) report brought those upside risks into stark relief.

Indeed, the July report makes it is hard to construct a narrative around declining inflation. The annual rate of increase is stuck at 3.6 per cent. Perhaps even more worrying the annualised 6-monthly rate of increase is at 3.9 per cent. That is the highest in the (admittedly short history) of the published monthly series.

The July report led RBA governor Michele Bullock to tell a parliamentary inquiry last week that the risks of inflation continuing to rise were “materialising”.

What is more, “sticky” inflation must cast some doubt on the prevailing RBA (and financial market consensus) narrative that monetary policy is restrictive. A “real” policy rate of somewhere around ½ – ¾ per cent does not strike me as particularly restrictive.

I have noted in the past that Australia’s poor relative inflation performance stems from abject productivity growth which makes the task of inflation containment all the harder, necessitating higher policy rates. That abject productivity growth reflects, inter alia, the interplay of regulatory creep in labour and goods markets. Regulatory creep also imposes costs on businesses, part of which are passed on to consumers, giving further impetus to price pressures.

In the absence of a meaningful deterioration in the labour market, I strongly suspect that the RBA will be required to raise the policy rate again at its September meeting.

Moreover, at this stage meetings beyond September must be considered “live”, even if the RBA were to raise the policy rate in September.

That may be the “least worse” path even in the event of a cooling labour market.

In the wake of the oil shocks of the 1970s, developed country central banks’ big mistake was a premature retreat from an inflation focus. That “let the inflation genie out of the bottle” and resulted in the painful, but necessarily harsh Volcker medicine of the late 1970s / early 1980s.

I am not suggesting that the current circumstance is one that is anywhere near quantitatively on a par with 1970s. But there are elements that are redolent of that time, albeit on a substantially reduced scale.

The RBA’s mandate has both an inflation and employment objective. Yet the RBA has only one instrument – monetary policy – at its disposal. Trying to target two variables with one instrument is nigh on impossible as any economics undergraduate with even cursory knowledge of the Tinbergen Rule will tell you.

In his Jackson Hole remarks, Warsh noted that the Fed also has a mandate for maximum employment. He added that achieving both sides of that mandate does not mean that monetary policy works at cross-purposes since high inflation itself is very harmful to economic prosperity.

Maybe the best the RBA can do to ensure maximum employment in the medium-term is to ensure a low and stable rate of inflation.

And that is why it must increase the policy rate at the end of the month and maybe beyond.

By Stephen Miller, investment strategist

The post Is a 5 per cent US 10-year bond yield the new normal? appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/09/is-a-5-per-cent-us-10-year-bond-yield-the-new-normal/feed/ 0 GSFM Symposium: AI, risk and valuation gaps https://www.adviservoice.com.au/2026/09/gsfm-symposium-ai-risk-and-valuation-gaps/ https://www.adviservoice.com.au/2026/09/gsfm-symposium-ai-risk-and-valuation-gaps/#respond Tue, 15 Sep 2026 21:20:28 +0000 https://www.adviservoice.com.au/?p=114019

Kevin Hebner

Investors need to look beyond traditional asset classes and approaches as shifts across global markets create new opportunities and challenges for portfolio construction, according to leading investment managers speaking at the GSFM Investment Symposium this month.

The Symposium brought together investment experts to examine the forces reshaping markets, from changing equity and bond correlations and valuation opportunities in Australian small and mid-caps, to the evolution of artificial intelligence, the growth potential across Asian markets and the increasing importance of infrastructure and private markets. 

AI – the one trade that matters?

The growth and potential of AI has dominated markets since 2023 but Nick Griffin, CIO at Munro Partners, said the world is still only at the start of the AI story.

“There’s a lot of talk about whether we’re in an AI bubble and our view is this is a boom, not a bubble. AI is the next big platform shift, and it’s only just beginning so we believe this is a very good time to be in investing,” he said.

“The shift to agentic AI is now taking off, and at a scale that we’ve never seen before in human history. But it’s still in its early stages – nothing grows like this at the end of its life only at the start of its life.

“Investors who are concerned about whether current valuations are sustainable or when AI companies will start delivering on their promises, should ask themselves this: Are people using a lot of AI? The answer is unequivocally yes. The next question is: are they going to use more AI? Again we believe the answer is unequivocally yes, because AI is a general purpose technology that’s applicable to every industry in the world. Currently we’re probably using less than five per cent of all the AI we are going to use in the next decade, so there is enormous upside still ahead.”

Kevin Hebner, global investment strategist at TD Epoch, agrees that AI is a long-term story but said investors should also prepare for ongoing market volatility.

“Our view is that AI is the third industrial revolution and that brings opportunities, but investors should keep in mind there will be booms and busts along the way so they need to construct resilient portfolios.

“Comparable examples from the past, such as the growth of railways, electricity, and autos, show there are multiple booms and busts during these kinds of cycle, so it’s important to create portfolios that are resilient, which means diversification – across the entire AI stack, geographies, and market cap.

 “It’s also important to de-hype portfolios. There’s a lot of hype and concentration in portfolios, for example towards tech momentum. So portfolio construction, risk management analysis, and constructing resilient portfolios, are critical and it’s more difficult than it’s ever been before,” he added.

Kristin Ceva, senior portfolio manager at Payden & Rygel, said the growth of AI is also playing out in fixed income markets around the world. 

“In fixed income markets, government issuance is expected to hold relatively flat over the next couple of years. But the area of fixed income that is really growing is AI financing which is becoming more of a credit and fixed income story. In 2027 AI financing is expected to be around $600 billion as focus shifts from being equity-led towards credit becoming a larger percentage of the overall pie,” she said.

“As this plays out, it will have implications for yields which will move higher, and credit spreads will potentially move higher as well. This makes it a longer-term positive story for savers and fixed-income investors.

“Fixed income also has an important role to play as a diversifier away from the AI trade. With the US equity market so dominated by AI assets, emerging market debt looks increasingly attractive. Many emerging markets are looking strong at the moment, having moved quickly to control inflation and supported by very resilient growth as well as improving external financing, better current-account balances and stronger foreign-reserve buffers.”

Alec Small, portfolio manager at Payden & Rygel, says the outlook for fixed income is very favourable. 

“There’s an adage in investing: do you want to eat well, or do you want to sleep well? The point being that a portfolio needs both, and bonds are the sleep-well side of it.” 

“What has changed is that investors are now being compensated properly for sleeping well, in a way they haven’t been for a number of years. Everyone wants your money right now, and when capital is scarce it has a price. That price is the yield. It’s a long way from the years after the financial crisis, when there was too much capital and not enough compelling places to put it, and lending to governments earned you very little after inflation.”

“The AI build-out needs to raise more than a trillion dollars next year, and those estimates have only moved one way in 2026: up. The hyperscalers get most of the attention, and deservedly so. They stepped up materially this year, to around $300 billion of bond issuance, and we expect that elevated pace to continue. But the incremental growth is coming from everyone else: data centres, neoclouds, the AI labs, plus new equity and IPOs. That is a lot of supply for the market to absorb, and it is one of the bigger reasons investors are being paid more to lend today.”

“And it’s not just a US story. We look at real yields, which is simply what you’re paid after inflation, and we compare each market against its own ten-year history rather than against each other. On that basis yields are elevated right across the market, in the US, in other developed markets and in emerging markets. For a stretch of the last decade, investors in some of those markets were effectively paying for the privilege of lending. That has reversed everywhere.”

Spreading risk across a portfolio

Investors may need to rethink the role of traditional portfolio diversifiers as the relationship between equities and bonds changes, and consider alternative strategies, private markets, and trend-following as increasingly important strategies.

According to Tarek Abou Zeid, head of client portfolio management at Man Group, the traditional role of bonds as a counter to equities has become less reliable, particularly in an environment where inflation remains elevated.

He highlighted that trend-following strategies are a potential source of alpha, particularly during a financial crisis. The innovation in these strategies could help address the traditional trade-off between performing well in crises and participating in markets during more benign periods.

“Investors have traditionally relied upon the 60/40 split, but they must now consider where portfolio protection and diversification will come from in the next market cycle.

“The performance of trend-following during market crises, whether the bear market in the early 2000s, the credit crisis in 2008, or COVID, shows that remaining invested, rather than attempting to time such events, allows investors to benefit as the models adapt to changing market cycles,” he added.

Marc-Andre Lewis, president and CIO of CI Global Asset Management, argued that effective portfolio construction requires an understanding of how investors are likely to behave during periods of market stress, amongst other things.

“Investors looking to private markets through evergreen fund-of-funds structures need to look beyond just selecting their underlying managers. A FOF portfolio needs to be built for investors, not just a mechanism to distribute funds.”

He also highlighted the importance of modelling the interaction between market movements, liquidity calls and distributions.

William Briggs, managing director at Ardian, said infrastructure gives investors exposure to assets that are increasingly essential to economic activity, while also providing potential protection against some of the forces driving market volatility.

 “Heathrow airport is an example of systemic infrastructure with cash-flow visibility, and inflation protection while also providing opportunities for industrial asset management and transformation.”

Valuation gaps visible as investors look beyond Australia’s mega caps

A widening valuation divide between large-cap stocks and the wider market is creating opportunities for active investors, with overlooked Australian SMID-cap companies and Asian technology emerging as opportunities for investors. 

Tim Carleton, CIO at Auscap Asset Management, said the Australian market had experienced a meaningful valuation dislocation over the last six months, with large-cap stocks becoming increasingly expensive.

 

“The valuation gap has emerged despite considerable difference in underlying earnings growth, creating opportunities for investors willing to look beyond the largest companies in the Australian market,” he said.

Carleton said the dynamic was evident in the retail sector, where since 2002, JB Hi-Fi has generated compound EPS growth of 11 per cent per annum compared with a decline in Woolworths’ EPS, yet Woolworths has historically traded at a premium valuation to JB Hi-Fi.

Andrew Swan, head of Asia (ex-Japan) equities at Man Group, said investors should also look beyond the established beneficiaries of the artificial intelligence boom as the technology enters a new phase.

“The AI opportunity is becoming much broader than the semiconductor companies that initially captured investors’ attention. As AI moves from training towards inference and agentic applications, the infrastructure required to support it is expanding across power, networking, cloud and applications,” he said.

Swan described Asia’s industrial production as being at a four-year high, while non-AI-related export strength has also been accelerating. Selected Asian economies account for approximately 76 per cent of the region’s exports, providing a significant opportunity set beyond the AI theme.

Qiao Ma, portfolio manager at Munro Partners, said small and mid-cap companies globally were being overlooked by investors despite the potential for significant earnings growth in areas benefiting from long-term structural trends.

“The opportunity in SMID-caps is not simply about buying cheaper companies. It is about finding businesses with the earnings growth and structural tailwinds that can allow them to grow into, and potentially beyond, the valuations the market is currently assigning them,” she said.

Qiao highlighted the aviation industry as one example of the structural opportunities emerging outside the better-known AI names, with rising travel demand meeting a constrained supply chain and shortages of aircraft, components and skilled labour.

]]>

Kevin Hebner

Investors need to look beyond traditional asset classes and approaches as shifts across global markets create new opportunities and challenges for portfolio construction, according to leading investment managers speaking at the GSFM Investment Symposium this month.

The Symposium brought together investment experts to examine the forces reshaping markets, from changing equity and bond correlations and valuation opportunities in Australian small and mid-caps, to the evolution of artificial intelligence, the growth potential across Asian markets and the increasing importance of infrastructure and private markets. 

AI – the one trade that matters?

The growth and potential of AI has dominated markets since 2023 but Nick Griffin, CIO at Munro Partners, said the world is still only at the start of the AI story.

“There’s a lot of talk about whether we’re in an AI bubble and our view is this is a boom, not a bubble. AI is the next big platform shift, and it’s only just beginning so we believe this is a very good time to be in investing,” he said.

“The shift to agentic AI is now taking off, and at a scale that we’ve never seen before in human history. But it’s still in its early stages – nothing grows like this at the end of its life only at the start of its life.

“Investors who are concerned about whether current valuations are sustainable or when AI companies will start delivering on their promises, should ask themselves this: Are people using a lot of AI? The answer is unequivocally yes. The next question is: are they going to use more AI? Again we believe the answer is unequivocally yes, because AI is a general purpose technology that’s applicable to every industry in the world. Currently we’re probably using less than five per cent of all the AI we are going to use in the next decade, so there is enormous upside still ahead.”

Kevin Hebner, global investment strategist at TD Epoch, agrees that AI is a long-term story but said investors should also prepare for ongoing market volatility.

“Our view is that AI is the third industrial revolution and that brings opportunities, but investors should keep in mind there will be booms and busts along the way so they need to construct resilient portfolios.

“Comparable examples from the past, such as the growth of railways, electricity, and autos, show there are multiple booms and busts during these kinds of cycle, so it’s important to create portfolios that are resilient, which means diversification – across the entire AI stack, geographies, and market cap.

 “It’s also important to de-hype portfolios. There’s a lot of hype and concentration in portfolios, for example towards tech momentum. So portfolio construction, risk management analysis, and constructing resilient portfolios, are critical and it’s more difficult than it’s ever been before,” he added.

Kristin Ceva, senior portfolio manager at Payden & Rygel, said the growth of AI is also playing out in fixed income markets around the world. 

“In fixed income markets, government issuance is expected to hold relatively flat over the next couple of years. But the area of fixed income that is really growing is AI financing which is becoming more of a credit and fixed income story. In 2027 AI financing is expected to be around $600 billion as focus shifts from being equity-led towards credit becoming a larger percentage of the overall pie,” she said.

“As this plays out, it will have implications for yields which will move higher, and credit spreads will potentially move higher as well. This makes it a longer-term positive story for savers and fixed-income investors.

“Fixed income also has an important role to play as a diversifier away from the AI trade. With the US equity market so dominated by AI assets, emerging market debt looks increasingly attractive. Many emerging markets are looking strong at the moment, having moved quickly to control inflation and supported by very resilient growth as well as improving external financing, better current-account balances and stronger foreign-reserve buffers.”

Alec Small, portfolio manager at Payden & Rygel, says the outlook for fixed income is very favourable. 

“There’s an adage in investing: do you want to eat well, or do you want to sleep well? The point being that a portfolio needs both, and bonds are the sleep-well side of it.” 

“What has changed is that investors are now being compensated properly for sleeping well, in a way they haven’t been for a number of years. Everyone wants your money right now, and when capital is scarce it has a price. That price is the yield. It’s a long way from the years after the financial crisis, when there was too much capital and not enough compelling places to put it, and lending to governments earned you very little after inflation.”

“The AI build-out needs to raise more than a trillion dollars next year, and those estimates have only moved one way in 2026: up. The hyperscalers get most of the attention, and deservedly so. They stepped up materially this year, to around $300 billion of bond issuance, and we expect that elevated pace to continue. But the incremental growth is coming from everyone else: data centres, neoclouds, the AI labs, plus new equity and IPOs. That is a lot of supply for the market to absorb, and it is one of the bigger reasons investors are being paid more to lend today.”

“And it’s not just a US story. We look at real yields, which is simply what you’re paid after inflation, and we compare each market against its own ten-year history rather than against each other. On that basis yields are elevated right across the market, in the US, in other developed markets and in emerging markets. For a stretch of the last decade, investors in some of those markets were effectively paying for the privilege of lending. That has reversed everywhere.”

Spreading risk across a portfolio

Investors may need to rethink the role of traditional portfolio diversifiers as the relationship between equities and bonds changes, and consider alternative strategies, private markets, and trend-following as increasingly important strategies.

According to Tarek Abou Zeid, head of client portfolio management at Man Group, the traditional role of bonds as a counter to equities has become less reliable, particularly in an environment where inflation remains elevated.

He highlighted that trend-following strategies are a potential source of alpha, particularly during a financial crisis. The innovation in these strategies could help address the traditional trade-off between performing well in crises and participating in markets during more benign periods.

“Investors have traditionally relied upon the 60/40 split, but they must now consider where portfolio protection and diversification will come from in the next market cycle.

“The performance of trend-following during market crises, whether the bear market in the early 2000s, the credit crisis in 2008, or COVID, shows that remaining invested, rather than attempting to time such events, allows investors to benefit as the models adapt to changing market cycles,” he added.

Marc-Andre Lewis, president and CIO of CI Global Asset Management, argued that effective portfolio construction requires an understanding of how investors are likely to behave during periods of market stress, amongst other things.

“Investors looking to private markets through evergreen fund-of-funds structures need to look beyond just selecting their underlying managers. A FOF portfolio needs to be built for investors, not just a mechanism to distribute funds.”

He also highlighted the importance of modelling the interaction between market movements, liquidity calls and distributions.

William Briggs, managing director at Ardian, said infrastructure gives investors exposure to assets that are increasingly essential to economic activity, while also providing potential protection against some of the forces driving market volatility.

 “Heathrow airport is an example of systemic infrastructure with cash-flow visibility, and inflation protection while also providing opportunities for industrial asset management and transformation.”

Valuation gaps visible as investors look beyond Australia’s mega caps

A widening valuation divide between large-cap stocks and the wider market is creating opportunities for active investors, with overlooked Australian SMID-cap companies and Asian technology emerging as opportunities for investors. 

Tim Carleton, CIO at Auscap Asset Management, said the Australian market had experienced a meaningful valuation dislocation over the last six months, with large-cap stocks becoming increasingly expensive.

 

“The valuation gap has emerged despite considerable difference in underlying earnings growth, creating opportunities for investors willing to look beyond the largest companies in the Australian market,” he said.

Carleton said the dynamic was evident in the retail sector, where since 2002, JB Hi-Fi has generated compound EPS growth of 11 per cent per annum compared with a decline in Woolworths’ EPS, yet Woolworths has historically traded at a premium valuation to JB Hi-Fi.

Andrew Swan, head of Asia (ex-Japan) equities at Man Group, said investors should also look beyond the established beneficiaries of the artificial intelligence boom as the technology enters a new phase.

“The AI opportunity is becoming much broader than the semiconductor companies that initially captured investors’ attention. As AI moves from training towards inference and agentic applications, the infrastructure required to support it is expanding across power, networking, cloud and applications,” he said.

Swan described Asia’s industrial production as being at a four-year high, while non-AI-related export strength has also been accelerating. Selected Asian economies account for approximately 76 per cent of the region’s exports, providing a significant opportunity set beyond the AI theme.

Qiao Ma, portfolio manager at Munro Partners, said small and mid-cap companies globally were being overlooked by investors despite the potential for significant earnings growth in areas benefiting from long-term structural trends.

“The opportunity in SMID-caps is not simply about buying cheaper companies. It is about finding businesses with the earnings growth and structural tailwinds that can allow them to grow into, and potentially beyond, the valuations the market is currently assigning them,” she said.

Qiao highlighted the aviation industry as one example of the structural opportunities emerging outside the better-known AI names, with rising travel demand meeting a constrained supply chain and shortages of aircraft, components and skilled labour.

The post GSFM Symposium: AI, risk and valuation gaps appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/09/gsfm-symposium-ai-risk-and-valuation-gaps/feed/ 0 Australian monthly CPI inflation https://www.adviservoice.com.au/2026/08/australian-monthly-cpi-inflation/ https://www.adviservoice.com.au/2026/08/australian-monthly-cpi-inflation/#respond Thu, 27 Aug 2026 21:30:30 +0000 https://www.adviservoice.com.au/?p=113580

Stephen Miller

Yesterday’s Australian monthly CPI inflation report makes the September RBA meeting “live”. In my assessment the Board should increase the policy rate at that meeting. I expect it will.

The July report makes it is hard to construct a narrative around declining inflation and again serves to emphasise Australia’s poor inflation performance relative to other developed economies – its structural homegrown inflation proclivity. The annual rate of increase is stuck at 3.6 per cent. Perhaps even more worrying the annualised 6-monthly rate of increase is at 3.9 per cent. That is the highest in the (admittedly short history) of the published monthly series.

What is more, “sticky” inflation must cast some doubt on the prevailing RBA (and financial market consensus) narrative that monetary policy is restrictive. A “real” policy rate of somewhere around ½ – ¾ per cent does not strike me as particularly restrictive, at least in terms of an inflation containment challenge compounded by policy missteps elsewhere.

US FED

Fed Chair Warsh has an opportunity to address some communication missteps when he addresses the Kansas City Fed’s Jackson Hole symposium on Friday night (AEST).

Bond markets have been unsettled by what they regard as still “sticky” inflation along with a perceived lack of inflation resolve on the part of the Fed Chair. Interventions by President Trump and Treasury Secretary Bessent’s clumsy intervention in the bond market have not helped the picture. Last night’s July private consumption expenditures (PCE) price index report provided some evidence that inflation continues to be less than feared. The traditional Fed inflation focus – the core private consumption expenditures (PCE) price index – is, at 3.3 per cent, well north of the Fed target of 2 per cent.

However, Warsh prefers the Dallas Fed trimmed-mean measure which is currently running at 2.3 per cent – not that far from the Fed target. That gives the Warsh Fed at least some temporary cover in eschewing a policy rate increase. Warsh has articulated is a desire to reframe the Fed’s strategic direction via the establishment of a series of taskforces covering communication, Fed balance sheet management, a review of data sources, productivity and jobs, and inflation drivers and measurement. By giving some indication of progress on these taskforces at Jackson Hole, Warsh might be able to better articulate a rationale for an unchanged policy rate.

Bond markets still have a bit to worry about, particularly the huge US Budget deficit, and, despite glimmers of hope, inflation is still a concern, but some communication around progress on the taskforces might be helpful for markets in gaining an understanding of the drivers of monetary policy under the Warsh regime at the Fed.

By Stephen Miller, investment specialist

]]>

Stephen Miller

Yesterday’s Australian monthly CPI inflation report makes the September RBA meeting “live”. In my assessment the Board should increase the policy rate at that meeting. I expect it will.

The July report makes it is hard to construct a narrative around declining inflation and again serves to emphasise Australia’s poor inflation performance relative to other developed economies – its structural homegrown inflation proclivity. The annual rate of increase is stuck at 3.6 per cent. Perhaps even more worrying the annualised 6-monthly rate of increase is at 3.9 per cent. That is the highest in the (admittedly short history) of the published monthly series.

What is more, “sticky” inflation must cast some doubt on the prevailing RBA (and financial market consensus) narrative that monetary policy is restrictive. A “real” policy rate of somewhere around ½ – ¾ per cent does not strike me as particularly restrictive, at least in terms of an inflation containment challenge compounded by policy missteps elsewhere.

US FED

Fed Chair Warsh has an opportunity to address some communication missteps when he addresses the Kansas City Fed’s Jackson Hole symposium on Friday night (AEST).

Bond markets have been unsettled by what they regard as still “sticky” inflation along with a perceived lack of inflation resolve on the part of the Fed Chair. Interventions by President Trump and Treasury Secretary Bessent’s clumsy intervention in the bond market have not helped the picture. Last night’s July private consumption expenditures (PCE) price index report provided some evidence that inflation continues to be less than feared. The traditional Fed inflation focus – the core private consumption expenditures (PCE) price index – is, at 3.3 per cent, well north of the Fed target of 2 per cent.

However, Warsh prefers the Dallas Fed trimmed-mean measure which is currently running at 2.3 per cent – not that far from the Fed target. That gives the Warsh Fed at least some temporary cover in eschewing a policy rate increase. Warsh has articulated is a desire to reframe the Fed’s strategic direction via the establishment of a series of taskforces covering communication, Fed balance sheet management, a review of data sources, productivity and jobs, and inflation drivers and measurement. By giving some indication of progress on these taskforces at Jackson Hole, Warsh might be able to better articulate a rationale for an unchanged policy rate.

Bond markets still have a bit to worry about, particularly the huge US Budget deficit, and, despite glimmers of hope, inflation is still a concern, but some communication around progress on the taskforces might be helpful for markets in gaining an understanding of the drivers of monetary policy under the Warsh regime at the Fed.

By Stephen Miller, investment specialist

The post Australian monthly CPI inflation appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/08/australian-monthly-cpi-inflation/feed/ 0 US inflation: nothing for the worry Warshs   https://www.adviservoice.com.au/2026/08/us-inflation-nothing-for-the-worry-warshs/ https://www.adviservoice.com.au/2026/08/us-inflation-nothing-for-the-worry-warshs/#respond Thu, 13 Aug 2026 21:25:43 +0000 https://www.adviservoice.com.au/?p=113230

Stephen Miller

Since the conclusion of the last Fed Federal Open Market Committee (FOMC) meeting, the US financial market commentariat have spent some time highlighting Fed Chair Warsh’s communication shortcomings.

It appears that Warsh unnecessarily let his (justified) antipathy toward forward guidance manifest itself in a reticence to communicate a rationale for the Fed’s decision to keep the policy rate steady, failing to communicate any detail regarding Fed members’ assessments of current inflation pressures, and indeed on the economy more broadly.

Warsh could have simply shared elements of the Fed’s current economic assessments without crossing the line into forward guidance.

By choosing to communicate nothing by way of a rationale for the FOMC decision the Fed Chair has created an information vacuum. In part reflecting that void, the bond market took the path of least resistance and arrived at a collective view that Warsh lacked resolve on inflation.

It probably didn’t help that President Trump opined that Warsh was doing a “fantastic job” and “would love to lower interest rates”.

That circumstance seems to have distracted the US bond market from an inflation picture that is much less challenging that might have been feared, particularly in the wake of the Trump Administration’s tariff policies and the potentially deleterious effect on inflation and inflation expectations from the surge in oil prices in the wake of the Iranian conflict.

Last night’s US consumer price index (CPI) release is another indicator of just how well US inflation has behaved despite the challenges from, among other things, tariffs and oil.

US core CPI inflation came in at 2.5 per cent, the lowest annual rate since March 2021. That was at the height of COVID deflation fears (remember that!).

Meanwhile, the traditional Fed inflation focus – the core private consumption expenditures (PCE) price index – is, at 3.3 per cent, well north of the Fed target of 2 per cent. Warsh prefers the Dallas Fed trimmed-mean measure which is currently running at 2.2 per cent (June read) – not that far from the Fed target and the lowest read since July 2021.

Of course, the vagaries of oil prices might upset that positive emergent US inflation narrative but nevertheless the forgoing results are a positive surprise.

Along with recent softer payrolls numbers they indicate that the Fed is not under any pressure to urgently raise the policy rate.

Bond markets still have a bit to worry about, particularly the huge US Budget deficit, but if Fed Chair Warsh had articulated that emergent positive narrative – and he could have done so that without crossing the forward guidance line – then perhaps bond markets might be well be a tad less anxious.

RBA: Bullock avoids the ‘Warsh trap’ but monetary policy challenges remain

Following the Fed Chair Warsh’s poorly received communication after the Fed kept rates steady in July, I conjectured that Reserve Bank of Australia (RBA) Governor Bullock would have to be on top of her communication game in the event the RBA held rates steady in the August meeting.

In the event those fears proved unfounded.

Bullock gave a credible rationale for the RBA’s decision to keep the policy rate steady. She framed the Monetary Policy Board (MPB) debate as one between keeping rates steady and increasing the policy rate, ceding the “bond vigilantes” some succour.  That was given some emphasis by a stated readiness to raise the policy rate should upside risks to inflation assert themselves.

Bullock speaks from a position of greater credibility than Warsh given that the RBA had raised the policy rate at three successive meetings in February, March and May of this year. In that sense she has revealed inflation-fighting credentials in a way that Warsh has yet to demonstrate.

The June quarter trimmed-mean inflation outcome at 3.6 per cent was below the RBA forecast of 3.8 per cent issued in May. So, the argument went, the increases in the policy rate so far this year are working to contain inflation, and with activity growth tepid, the balance of risks pointed to no further requirement for an increase at the August meeting.

Bullock communicated this in a clear and balanced way, albeit one can argue whether the Board arrived at the “correct” decision.

Warsh on the other hand, unnecessarily let his antipathy toward forward guidance manifest itself in a reticence to communicate a rationale for the Fed’s decision to keep the policy rate steady, failing to communicate any detail regarding Fed members’ assessments of current inflation pressures, and indeed on the economy more broadly.

Warsh could have shared elements of the Fed’s current economic assessments without crossing the line into forward guidance.

Taking a leaf out of Bullock’s approach, Warsh might have pointed out that US inflation has been less than feared.

In other words, there were good reasons for the Fed leaving the policy rate unchanged.

Last night’s July CPI report reaffirmed that.

Warsh has in the past conjectured that disinflation in the US will follow from tremendous (largely AI motivated) investment. In Warsh’s view that investment has wrought a productivity dividend that (other things equal) has raised the US economy’s “speed limit”. In other words, the US economy can grow at faster rate before igniting inflationary pressures.

The notion that AI driven productivity growth can constrain inflation is a credible – if debatable – position. Some worry that the huge capex requirements associated with AI might in the short-term put demand pressure on inflation. Indeed, it is the latter that the RBA emphasised in its articulation of upside risks to inflation.

The RBA’s decision to hold the policy rate at the August meeting, however, is not without some risk. Australia has an “underlying” inflation rate that is among the highest in the developed world. That reflects the stark reality of a homegrown structural inflation proclivity. I tend to think that the RBA underplays this factor in its public commentary.

I have noted in the past that that reflects the interplay of regulatory creep in labour and goods markets that impose costs on businesses, part of which are passed on to consumers, and which result in abject productivity growth which makes the task of inflation containment all the harder. Australia’s abject productivity growth may be why AI related capex has a greater inflation impulse in Australia.

Frustratingly, governments (state and federal; Labor and Coalition) have displayed a ‘head in the sand’ approach to dealing with these issues and unfortunately the current Federal government is no exception.

In that context, the policy rate “hold” from the RBA last week may be defensible but I continue to worry that the RBA will be required to raise the policy rate again at some stage in 2026. Unit labour cost growth in excess of 3 per cent (even if down from 5 per cent a year ago) is hard to square with a seamless return of inflation to the mid-point of the target. Too great a delay in tightening policy runs the risk of too “sticky” an inflation rate and, as a consequence, a more substantial dislocation in economic activity and in the labour market down the track.

By Stephen Miller, investment stragtegist.

]]>

Stephen Miller

Since the conclusion of the last Fed Federal Open Market Committee (FOMC) meeting, the US financial market commentariat have spent some time highlighting Fed Chair Warsh’s communication shortcomings.

It appears that Warsh unnecessarily let his (justified) antipathy toward forward guidance manifest itself in a reticence to communicate a rationale for the Fed’s decision to keep the policy rate steady, failing to communicate any detail regarding Fed members’ assessments of current inflation pressures, and indeed on the economy more broadly.

Warsh could have simply shared elements of the Fed’s current economic assessments without crossing the line into forward guidance.

By choosing to communicate nothing by way of a rationale for the FOMC decision the Fed Chair has created an information vacuum. In part reflecting that void, the bond market took the path of least resistance and arrived at a collective view that Warsh lacked resolve on inflation.

It probably didn’t help that President Trump opined that Warsh was doing a “fantastic job” and “would love to lower interest rates”.

That circumstance seems to have distracted the US bond market from an inflation picture that is much less challenging that might have been feared, particularly in the wake of the Trump Administration’s tariff policies and the potentially deleterious effect on inflation and inflation expectations from the surge in oil prices in the wake of the Iranian conflict.

Last night’s US consumer price index (CPI) release is another indicator of just how well US inflation has behaved despite the challenges from, among other things, tariffs and oil.

US core CPI inflation came in at 2.5 per cent, the lowest annual rate since March 2021. That was at the height of COVID deflation fears (remember that!).

Meanwhile, the traditional Fed inflation focus – the core private consumption expenditures (PCE) price index – is, at 3.3 per cent, well north of the Fed target of 2 per cent. Warsh prefers the Dallas Fed trimmed-mean measure which is currently running at 2.2 per cent (June read) – not that far from the Fed target and the lowest read since July 2021.

Of course, the vagaries of oil prices might upset that positive emergent US inflation narrative but nevertheless the forgoing results are a positive surprise.

Along with recent softer payrolls numbers they indicate that the Fed is not under any pressure to urgently raise the policy rate.

Bond markets still have a bit to worry about, particularly the huge US Budget deficit, but if Fed Chair Warsh had articulated that emergent positive narrative – and he could have done so that without crossing the forward guidance line – then perhaps bond markets might be well be a tad less anxious.

RBA: Bullock avoids the ‘Warsh trap’ but monetary policy challenges remain

Following the Fed Chair Warsh’s poorly received communication after the Fed kept rates steady in July, I conjectured that Reserve Bank of Australia (RBA) Governor Bullock would have to be on top of her communication game in the event the RBA held rates steady in the August meeting.

In the event those fears proved unfounded.

Bullock gave a credible rationale for the RBA’s decision to keep the policy rate steady. She framed the Monetary Policy Board (MPB) debate as one between keeping rates steady and increasing the policy rate, ceding the “bond vigilantes” some succour.  That was given some emphasis by a stated readiness to raise the policy rate should upside risks to inflation assert themselves.

Bullock speaks from a position of greater credibility than Warsh given that the RBA had raised the policy rate at three successive meetings in February, March and May of this year. In that sense she has revealed inflation-fighting credentials in a way that Warsh has yet to demonstrate.

The June quarter trimmed-mean inflation outcome at 3.6 per cent was below the RBA forecast of 3.8 per cent issued in May. So, the argument went, the increases in the policy rate so far this year are working to contain inflation, and with activity growth tepid, the balance of risks pointed to no further requirement for an increase at the August meeting.

Bullock communicated this in a clear and balanced way, albeit one can argue whether the Board arrived at the “correct” decision.

Warsh on the other hand, unnecessarily let his antipathy toward forward guidance manifest itself in a reticence to communicate a rationale for the Fed’s decision to keep the policy rate steady, failing to communicate any detail regarding Fed members’ assessments of current inflation pressures, and indeed on the economy more broadly.

Warsh could have shared elements of the Fed’s current economic assessments without crossing the line into forward guidance.

Taking a leaf out of Bullock’s approach, Warsh might have pointed out that US inflation has been less than feared.

In other words, there were good reasons for the Fed leaving the policy rate unchanged.

Last night’s July CPI report reaffirmed that.

Warsh has in the past conjectured that disinflation in the US will follow from tremendous (largely AI motivated) investment. In Warsh’s view that investment has wrought a productivity dividend that (other things equal) has raised the US economy’s “speed limit”. In other words, the US economy can grow at faster rate before igniting inflationary pressures.

The notion that AI driven productivity growth can constrain inflation is a credible – if debatable – position. Some worry that the huge capex requirements associated with AI might in the short-term put demand pressure on inflation. Indeed, it is the latter that the RBA emphasised in its articulation of upside risks to inflation.

The RBA’s decision to hold the policy rate at the August meeting, however, is not without some risk. Australia has an “underlying” inflation rate that is among the highest in the developed world. That reflects the stark reality of a homegrown structural inflation proclivity. I tend to think that the RBA underplays this factor in its public commentary.

I have noted in the past that that reflects the interplay of regulatory creep in labour and goods markets that impose costs on businesses, part of which are passed on to consumers, and which result in abject productivity growth which makes the task of inflation containment all the harder. Australia’s abject productivity growth may be why AI related capex has a greater inflation impulse in Australia.

Frustratingly, governments (state and federal; Labor and Coalition) have displayed a ‘head in the sand’ approach to dealing with these issues and unfortunately the current Federal government is no exception.

In that context, the policy rate “hold” from the RBA last week may be defensible but I continue to worry that the RBA will be required to raise the policy rate again at some stage in 2026. Unit labour cost growth in excess of 3 per cent (even if down from 5 per cent a year ago) is hard to square with a seamless return of inflation to the mid-point of the target. Too great a delay in tightening policy runs the risk of too “sticky” an inflation rate and, as a consequence, a more substantial dislocation in economic activity and in the labour market down the track.

By Stephen Miller, investment stragtegist.

The post US inflation: nothing for the worry Warshs   appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/08/us-inflation-nothing-for-the-worry-warshs/feed/ 0 CPD: Why private market assets belong in client portfolios https://www.adviservoice.com.au/2026/08/cpd-why-private-market-assets-belong-in-client-portfolios/ https://www.adviservoice.com.au/2026/08/cpd-why-private-market-assets-belong-in-client-portfolios/#respond Tue, 04 Aug 2026 20:30:07 +0000 https://www.adviservoice.com.au/?p=112998

Private markets are becoming an increasingly important component of diversified investment portfolios.

Australia’s superannuation funds have quietly reshaped their portfolios over the past decade, and the numbers tell the private markets story better than any commentary can. Hostplus allocates 38% of its ‘balanced’ option to private markets, AustralianSuper sits at 23.75%, and ART discloses 29.5% in unlisted and alternative assets[1]. These aren’t marginal allocations. They represent a structural shift in how the largest pools of retirement capital in the country are being invested, and that shift has implications beyond the super sector.

For financial advisers, this raises an obvious question. If institutional investors have moved so decisively into private markets, what does that mean for your clients? Private equity, private credit, unlisted infrastructure and private real estate were once considered specialist territory, reserved for large institutions with the scale and patience to commit capital for a decade or more. That’s no longer the case. Access has broadened, structures have matured and the case for including private markets in a well-constructed portfolio has become harder to ignore.

It’s important to note why private markets have traditionally sat out of reach for most advisers and their clients. Private companies aren’t held to the same disclosure standards as listed companies, so the information available about their operations is far more limited, and the due diligence needed to assess them properly has largely been the preserve of institutions with the resources to do it well.

Minimum investment sizes add another barrier, and the sheer breadth of sectors and sub-sectors within private markets makes genuine diversification difficult for retail investors to achieve on their own, assuming they can secure access to begin with.

These aren’t small hurdles and they’re part of the reason private markets have taken time to reach a broader audience. But the diversification private markets can offer away from public markets, particularly during volatile geopolitical periods, is a genuine and growing part of the case for including them in client portfolios.

What are private markets?

Private markets refer to capital invested in companies and assets that aren’t listed on a public exchange. Where a public market investor buys shares in a company through the ASX or other exchange, a private markets investor commits capital directly to a business, project or asset that isn’t publicly traded. That capital is usually held for years rather than traded day to day.

The asset class covers several distinct categories, each with its own risk and return profile:

  • Private equity involves taking ownership stakes in private companies, often with the goal of improving operations or growth before an eventual sale or listing.
  • Private credit is direct lending to companies, typically businesses that sit outside the reach of traditional bank lending or public bond markets.
  • Private infrastructure covers long-life physical assets such as toll roads, energy networks and data centres, generally chosen for their stable, often inflation-linked income.
  • Private real estate involves direct or fund-based ownership of property assets that aren’t held through listed property trusts.
  • Venture capital funds early-stage, high-growth companies, often in technology or life sciences, where the potential for outsized returns comes with a higher risk of failure.

The mechanics of investing in private markets differ from public markets in a few important ways. Most private market funds operate on a capital call basis, meaning an investor commits a set amount of capital upfront but the manager draws it down over time as opportunities arise.

Returns are typically distributed back to investors as the underlying assets are sold or refinanced, rather than through the ongoing dividends or capital growth an investor might expect from a listed share. And because these assets aren’t traded on an exchange, there’s no daily market price. Valuations are set periodically by the fund manager, usually quarterly, based on independent assessments.

As previously noted, private markets were, until fairly recently, the domain of large institutions. Minimum investment sizes were high, lock-up periods were long and the due diligence required to select and monitor individual fund managers was significant.

That is changing. The emergence of evergreen and semi-liquid fund structures, wider distribution through wealth platforms and growing manager appetite for the retail and high net worth channel have all lowered the practical barriers to entry. For advisers, this means an asset class that was once out of reach most clients is increasingly something to actively consider as part of mainstream portfolio construction.

The move from public to private

The Australian public market has been shrinking, a trend that isn’t new or seemingly temporary. On 31 December 2024, the ASX had 1,989 domestic and foreign equity issuers listed, and while total market capitalisation sat near record highs, the number of listed companies fell by 145 between December 2022 and December 2024, the largest two-year decline since the recession of the early 1990s. That decline was driven by two factors: fewer new listings (66) and a larger number of delistings (211).[2]

This pattern isn’t unique to Australia. In the United States, the number of publicly listed companies has halved over the past 25 years, and the London Stock Exchange has seen a 15% reduction in listings over the past decade. Companies across major markets are choosing to stay private for longer, or leaving public markets altogether, and Australia is following the same structural path[2].

Meanwhile, capital has been flowing the other way. According to ASIC, the total value of Australian public equity and debt markets doubled over the ten years to 2024, while the value of private capital funds grew by 161% over the same period[4], comfortably outpacing public market growth. That gap is the clearest evidence of where investor appetite has been heading.

The scale of this shift is visible globally and can be seen by following the money. Preqin expects the global alternatives market, spanning private equity, private credit, infrastructure, real estate, hedge funds and natural resources, to reach US$32 trillion in assets under management by 2030[5].

The trade-off between public and private markets is relatively straightforward. Public markets offer daily liquidity, price transparency and a level of regulatory oversight that private markets don’t. Private markets offer access to a broader and growing opportunity set, often with less short-term volatility, in exchange for reduced liquidity and less frequent, manager-determined valuations. Private markets are typically uncorrelated with traditional public market investments, adding diversification benefits to the ‘pros’ column for private market investments. For advisers, understanding this trade-off is the starting point for deciding whether, and how much, private markets exposure suits a given client.

The benefits of private market investment

The case for private markets rests on more than access to a growing opportunity set. For advisers building portfolios, the core appeal comes down to a handful of practical benefits, and diversification sits at the top of the list.

Diversification

Public and private markets don’t move in lockstep, and that gap is where much of the diversification benefit comes from; there’s a significant dispersion of returns between investments and investment managers. What that means is the difference between the best-performing private market asset manager and the worst-performing is sometimes five times as much as the difference in performance in listed markets.

The dispersion in the private space can be thousands of basis points, whereas in the listed space the dispersion of returns typically would be closer to 100 basis points in fixed income and 200 basis points in equities.

Therefore, there are huge opportunities for investors to outperform. But equally, if they choose the wrong investment or fund, there is the chance that their investment could severely underperform.

A broader opportunity set

Diversification isn’t only about correlation. It’s also about access to a different universe of companies and assets altogether. Private equity invests in a distinct set of businesses that sit outside public indexes entirely, giving investors exposure to different capital structures, growth profiles and industries than they’d find on a listed exchange. With fewer listed companies and a narrower range of economic exposures on public markets, private equity has increasingly become a source of opportunities that public markets simply can’t replicate. The same holds for private credit and private real estate.

Private credit gives investors access to lending relationships with mid-sized businesses that sit outside the reach of bank balance sheets and public bond markets, a segment of the lending market with no real public equivalent.

Private real estate opens up a wider range of property types than the relatively narrow set found in listed property trusts, including sectors such as build-to-rent, data centre facilities and specialist industrial assets, with valuations tied more closely to the performance of the physical asset itself rather than to listed market swings.

Return potential and income characteristics

Private markets have historically offered the potential for enhanced returns relative to public market benchmarks, reflecting the illiquidity premium investors are compensated for locking up capital over longer periods, along with the value active managers can add through direct involvement in portfolio companies. Certain private market categories, particularly infrastructure and private credit, also offer income streams that are often more stable or contractually linked to inflation than their listed equivalents, which can be a useful complement for clients seeking defensive income alongside growth.

Resilience in volatile periods

Because private market valuations are set periodically rather than priced daily, portfolios with private markets exposure tend to show a smoother return path through periods of public market volatility. This shouldn’t be mistaken for an absence of risk, but it does mean clients are less likely to see the same day-to-day swings in reported value that come with a fully listed portfolio, which can support better client outcomes during periods of market stress simply by reducing the temptation to react to short-term noise.

Co-investment and fund of fund structures

Private markets aren’t a single asset class but a wide array. Each of these behaves differently, carries a different risk profile and offers the potential for substantial gains alongside the potential for substantial losses. What’s the best way for your clients to approach such a diverse and, in places, high-risk field?

GSFM’s private markets partner CI Global Asset Management believes that a multi-strategy approach delivers the best outcome for most investors, for several reasons.

Access to specialised expertise

The first is expertise. Private credit, private equity, venture capital and infrastructure each require a different skill set to assess properly, and a manager who understands how to evaluate a mid-market lending deal isn’t necessarily equipped to assess a venture capital opportunity or an infrastructure asset. A multi-strategy structure provides investors with access to specialists in each individual asset class, rather than relying on one team with broad but shallow knowledge spread across private markets as a whole.

Scale matters

To deliver genuine diversification across these asset classes, a multi-manager operator needs scale. Scale is what opens doors to deal flow in the first place, since the best private market opportunities are often oversubscribed and go to investors with the strongest existing relationships. It also translates into negotiating power on fees, since a large operator committing significant capital is in a far stronger position to negotiate favourable terms than a smaller investor or wealth adviser trying to access the same opportunity independently.

Due diligence takes considerable resources

Private markets don’t come with the same public disclosure requirements that apply to listed companies, which means the due diligence process looks very different. Assessing a manager or a deal properly requires background research into the companies involved and the people running them, none of which is readily available through public filings. A multi-strategy operator needs sufficient scale and resourcing to do this work properly, both at the point of initial investment and on an ongoing basis, since private market monitoring doesn’t (or shouldn’t!) stop once capital has been committed.

Co-investment as a complement

Within a multi-strategy structure, co-investment can play a useful additional role. This is the opportunity to invest directly alongside a fund manager in a specific deal, sitting next to the manager’s own fund capital in that transaction. Because there’s no second layer of fund fees on top of the deal, co-investment is typically a lower-cost way to add targeted exposure. These opportunities tend to go to those existing investors who bring more than capital, whether that’s scale, relationship history or the ability to move quickly. This is where the ecosystem argument becomes most relevant.

Why the ecosystem matters

Being part of a large, well-resourced multi-strategy structure gives investors access to networks and relationships that a smaller platform would struggle to replicate. Large managers see more deal flow than smaller ones, get better allocation in oversubscribed funds and can negotiate more favourable terms across fees, co-investment rights and reporting standards. This is because of the scale of capital they represent. For a client invested through a large, well-connected platform, that access comes built into the structure itself. 

Weighing the trade offs

None of this comes without cost. A multi-strategy structure generally adds an additional layer of fees on top of the fees charged by the underlying funds, and advisers need to be able to explain that layered cost clearly to clients and weigh it against the diversification, expertise and access benefits on offer.

For most clients new to private markets, a multi-strategy structure offers the more practical starting point because it combines specialised manager selection, diversification and ongoing due diligence in a single vehicle, backed by the scale needed to do all three properly.

The investor case in a nutshell

As more companies choose to stay private for longer, the case for looking to private markets for genuine diversification only gets stronger. This isn’t a niche addition to a portfolio. It’s a meaningful shift in where opportunity lie in today’s investment environment.

Private companies are typically valued only quarterly, which means they operate outside the daily noise of listed markets. That gives managers room to focus on improving operations and building long-term value in the underlying assets, rather than managing to a share price. Private credit and venture capital extend the opportunity further still, offering access to businesses and deals that simply don’t exist in public markets, from lending relationships with companies outside the reach of bank balance sheets to early-stage businesses years away from any listing.

Done well, with the right strategic asset allocation, a private markets allocation should make a portfolio more efficient overall, with the potential for higher returns and lower volatility. That’s not a new idea, as illustrated by the super fund allocations highlighted at the beginning of the article.

Direct access remains difficult for most investors, given the scale of the assets involved and the relationships needed to get in the door. But a growing range of private markets funds now invest across private markets opportunities, giving your clients a practical way in.

In short, the investment case for your clients can be summarised succinctly as follows: broader diversification, access to opportunities public markets can’t offer, and a structure that’s worked for institutions for decades, now increasingly available to a wider range of investors.

None of this replaces your careful client-by-client judgement. Private markets will suit some clients well and others not at all; you are best placed to weigh liquidity needs, time horizon and cost against the potential benefits before making a recommendation.

However, for those clients where a private markets allocation makes sense, the opportunity is clear. What sophisticated institutional investors have been doing for decades is now within reach of a much wider range of clients through the right fund structures. Private markets have moved from the margins of institutional investing to a core part of how capital is being allocated; now they can form part of your investment strategy to be used to benefit clients.

 

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The following CPD quiz is accredited by the FAAA at 0.25 hour.

Legislated CPD Area: Technical Competence (0.25 hrs)

ASIC Knowledge Requirements: Alternative Assets (0.25 hrs)

———–
Notes:
[1] Open Markets
[2] ASIC
[3] Investing.com
[4] Morningstar
[5]  Prequin
The information included in this article is provided for informational purposes only and is general advice only. It does not take into account an investor’s own objectives. The information contained in this article reflects, as of the date of publication, the current opinion of GSFM Pty Ltd and CI Global Asset Management and is subject to change without notice. Sources for the material contained in this article are deemed reliable but cannot be guaranteed. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our judgment at this date, are subject to change and should not be relied upon as the basis of your investment decisions. All reasonable care has been taken in producing the information set out in this article however subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information. Neither CI Global Asset Management, GSFM Pty Ltd, their related bodies nor associates gives any warranty nor makes any representation nor accepts responsibility for the accuracy or completeness of the information contained in this article.
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Private markets are becoming an increasingly important component of diversified investment portfolios.

Australia’s superannuation funds have quietly reshaped their portfolios over the past decade, and the numbers tell the private markets story better than any commentary can. Hostplus allocates 38% of its ‘balanced’ option to private markets, AustralianSuper sits at 23.75%, and ART discloses 29.5% in unlisted and alternative assets[1]. These aren’t marginal allocations. They represent a structural shift in how the largest pools of retirement capital in the country are being invested, and that shift has implications beyond the super sector.

For financial advisers, this raises an obvious question. If institutional investors have moved so decisively into private markets, what does that mean for your clients? Private equity, private credit, unlisted infrastructure and private real estate were once considered specialist territory, reserved for large institutions with the scale and patience to commit capital for a decade or more. That’s no longer the case. Access has broadened, structures have matured and the case for including private markets in a well-constructed portfolio has become harder to ignore.

It’s important to note why private markets have traditionally sat out of reach for most advisers and their clients. Private companies aren’t held to the same disclosure standards as listed companies, so the information available about their operations is far more limited, and the due diligence needed to assess them properly has largely been the preserve of institutions with the resources to do it well.

Minimum investment sizes add another barrier, and the sheer breadth of sectors and sub-sectors within private markets makes genuine diversification difficult for retail investors to achieve on their own, assuming they can secure access to begin with.

These aren’t small hurdles and they’re part of the reason private markets have taken time to reach a broader audience. But the diversification private markets can offer away from public markets, particularly during volatile geopolitical periods, is a genuine and growing part of the case for including them in client portfolios.

What are private markets?

Private markets refer to capital invested in companies and assets that aren’t listed on a public exchange. Where a public market investor buys shares in a company through the ASX or other exchange, a private markets investor commits capital directly to a business, project or asset that isn’t publicly traded. That capital is usually held for years rather than traded day to day.

The asset class covers several distinct categories, each with its own risk and return profile:

  • Private equity involves taking ownership stakes in private companies, often with the goal of improving operations or growth before an eventual sale or listing.
  • Private credit is direct lending to companies, typically businesses that sit outside the reach of traditional bank lending or public bond markets.
  • Private infrastructure covers long-life physical assets such as toll roads, energy networks and data centres, generally chosen for their stable, often inflation-linked income.
  • Private real estate involves direct or fund-based ownership of property assets that aren’t held through listed property trusts.
  • Venture capital funds early-stage, high-growth companies, often in technology or life sciences, where the potential for outsized returns comes with a higher risk of failure.

The mechanics of investing in private markets differ from public markets in a few important ways. Most private market funds operate on a capital call basis, meaning an investor commits a set amount of capital upfront but the manager draws it down over time as opportunities arise.

Returns are typically distributed back to investors as the underlying assets are sold or refinanced, rather than through the ongoing dividends or capital growth an investor might expect from a listed share. And because these assets aren’t traded on an exchange, there’s no daily market price. Valuations are set periodically by the fund manager, usually quarterly, based on independent assessments.

As previously noted, private markets were, until fairly recently, the domain of large institutions. Minimum investment sizes were high, lock-up periods were long and the due diligence required to select and monitor individual fund managers was significant.

That is changing. The emergence of evergreen and semi-liquid fund structures, wider distribution through wealth platforms and growing manager appetite for the retail and high net worth channel have all lowered the practical barriers to entry. For advisers, this means an asset class that was once out of reach most clients is increasingly something to actively consider as part of mainstream portfolio construction.

The move from public to private

The Australian public market has been shrinking, a trend that isn’t new or seemingly temporary. On 31 December 2024, the ASX had 1,989 domestic and foreign equity issuers listed, and while total market capitalisation sat near record highs, the number of listed companies fell by 145 between December 2022 and December 2024, the largest two-year decline since the recession of the early 1990s. That decline was driven by two factors: fewer new listings (66) and a larger number of delistings (211).[2]

This pattern isn’t unique to Australia. In the United States, the number of publicly listed companies has halved over the past 25 years, and the London Stock Exchange has seen a 15% reduction in listings over the past decade. Companies across major markets are choosing to stay private for longer, or leaving public markets altogether, and Australia is following the same structural path[2].

Meanwhile, capital has been flowing the other way. According to ASIC, the total value of Australian public equity and debt markets doubled over the ten years to 2024, while the value of private capital funds grew by 161% over the same period[4], comfortably outpacing public market growth. That gap is the clearest evidence of where investor appetite has been heading.

The scale of this shift is visible globally and can be seen by following the money. Preqin expects the global alternatives market, spanning private equity, private credit, infrastructure, real estate, hedge funds and natural resources, to reach US$32 trillion in assets under management by 2030[5].

The trade-off between public and private markets is relatively straightforward. Public markets offer daily liquidity, price transparency and a level of regulatory oversight that private markets don’t. Private markets offer access to a broader and growing opportunity set, often with less short-term volatility, in exchange for reduced liquidity and less frequent, manager-determined valuations. Private markets are typically uncorrelated with traditional public market investments, adding diversification benefits to the ‘pros’ column for private market investments. For advisers, understanding this trade-off is the starting point for deciding whether, and how much, private markets exposure suits a given client.

The benefits of private market investment

The case for private markets rests on more than access to a growing opportunity set. For advisers building portfolios, the core appeal comes down to a handful of practical benefits, and diversification sits at the top of the list.

Diversification

Public and private markets don’t move in lockstep, and that gap is where much of the diversification benefit comes from; there’s a significant dispersion of returns between investments and investment managers. What that means is the difference between the best-performing private market asset manager and the worst-performing is sometimes five times as much as the difference in performance in listed markets.

The dispersion in the private space can be thousands of basis points, whereas in the listed space the dispersion of returns typically would be closer to 100 basis points in fixed income and 200 basis points in equities.

Therefore, there are huge opportunities for investors to outperform. But equally, if they choose the wrong investment or fund, there is the chance that their investment could severely underperform.

A broader opportunity set

Diversification isn’t only about correlation. It’s also about access to a different universe of companies and assets altogether. Private equity invests in a distinct set of businesses that sit outside public indexes entirely, giving investors exposure to different capital structures, growth profiles and industries than they’d find on a listed exchange. With fewer listed companies and a narrower range of economic exposures on public markets, private equity has increasingly become a source of opportunities that public markets simply can’t replicate. The same holds for private credit and private real estate.

Private credit gives investors access to lending relationships with mid-sized businesses that sit outside the reach of bank balance sheets and public bond markets, a segment of the lending market with no real public equivalent.

Private real estate opens up a wider range of property types than the relatively narrow set found in listed property trusts, including sectors such as build-to-rent, data centre facilities and specialist industrial assets, with valuations tied more closely to the performance of the physical asset itself rather than to listed market swings.

Return potential and income characteristics

Private markets have historically offered the potential for enhanced returns relative to public market benchmarks, reflecting the illiquidity premium investors are compensated for locking up capital over longer periods, along with the value active managers can add through direct involvement in portfolio companies. Certain private market categories, particularly infrastructure and private credit, also offer income streams that are often more stable or contractually linked to inflation than their listed equivalents, which can be a useful complement for clients seeking defensive income alongside growth.

Resilience in volatile periods

Because private market valuations are set periodically rather than priced daily, portfolios with private markets exposure tend to show a smoother return path through periods of public market volatility. This shouldn’t be mistaken for an absence of risk, but it does mean clients are less likely to see the same day-to-day swings in reported value that come with a fully listed portfolio, which can support better client outcomes during periods of market stress simply by reducing the temptation to react to short-term noise.

Co-investment and fund of fund structures

Private markets aren’t a single asset class but a wide array. Each of these behaves differently, carries a different risk profile and offers the potential for substantial gains alongside the potential for substantial losses. What’s the best way for your clients to approach such a diverse and, in places, high-risk field?

GSFM’s private markets partner CI Global Asset Management believes that a multi-strategy approach delivers the best outcome for most investors, for several reasons.

Access to specialised expertise

The first is expertise. Private credit, private equity, venture capital and infrastructure each require a different skill set to assess properly, and a manager who understands how to evaluate a mid-market lending deal isn’t necessarily equipped to assess a venture capital opportunity or an infrastructure asset. A multi-strategy structure provides investors with access to specialists in each individual asset class, rather than relying on one team with broad but shallow knowledge spread across private markets as a whole.

Scale matters

To deliver genuine diversification across these asset classes, a multi-manager operator needs scale. Scale is what opens doors to deal flow in the first place, since the best private market opportunities are often oversubscribed and go to investors with the strongest existing relationships. It also translates into negotiating power on fees, since a large operator committing significant capital is in a far stronger position to negotiate favourable terms than a smaller investor or wealth adviser trying to access the same opportunity independently.

Due diligence takes considerable resources

Private markets don’t come with the same public disclosure requirements that apply to listed companies, which means the due diligence process looks very different. Assessing a manager or a deal properly requires background research into the companies involved and the people running them, none of which is readily available through public filings. A multi-strategy operator needs sufficient scale and resourcing to do this work properly, both at the point of initial investment and on an ongoing basis, since private market monitoring doesn’t (or shouldn’t!) stop once capital has been committed.

Co-investment as a complement

Within a multi-strategy structure, co-investment can play a useful additional role. This is the opportunity to invest directly alongside a fund manager in a specific deal, sitting next to the manager’s own fund capital in that transaction. Because there’s no second layer of fund fees on top of the deal, co-investment is typically a lower-cost way to add targeted exposure. These opportunities tend to go to those existing investors who bring more than capital, whether that’s scale, relationship history or the ability to move quickly. This is where the ecosystem argument becomes most relevant.

Why the ecosystem matters

Being part of a large, well-resourced multi-strategy structure gives investors access to networks and relationships that a smaller platform would struggle to replicate. Large managers see more deal flow than smaller ones, get better allocation in oversubscribed funds and can negotiate more favourable terms across fees, co-investment rights and reporting standards. This is because of the scale of capital they represent. For a client invested through a large, well-connected platform, that access comes built into the structure itself. 

Weighing the trade offs

None of this comes without cost. A multi-strategy structure generally adds an additional layer of fees on top of the fees charged by the underlying funds, and advisers need to be able to explain that layered cost clearly to clients and weigh it against the diversification, expertise and access benefits on offer.

For most clients new to private markets, a multi-strategy structure offers the more practical starting point because it combines specialised manager selection, diversification and ongoing due diligence in a single vehicle, backed by the scale needed to do all three properly.

The investor case in a nutshell

As more companies choose to stay private for longer, the case for looking to private markets for genuine diversification only gets stronger. This isn’t a niche addition to a portfolio. It’s a meaningful shift in where opportunity lie in today’s investment environment.

Private companies are typically valued only quarterly, which means they operate outside the daily noise of listed markets. That gives managers room to focus on improving operations and building long-term value in the underlying assets, rather than managing to a share price. Private credit and venture capital extend the opportunity further still, offering access to businesses and deals that simply don’t exist in public markets, from lending relationships with companies outside the reach of bank balance sheets to early-stage businesses years away from any listing.

Done well, with the right strategic asset allocation, a private markets allocation should make a portfolio more efficient overall, with the potential for higher returns and lower volatility. That’s not a new idea, as illustrated by the super fund allocations highlighted at the beginning of the article.

Direct access remains difficult for most investors, given the scale of the assets involved and the relationships needed to get in the door. But a growing range of private markets funds now invest across private markets opportunities, giving your clients a practical way in.

In short, the investment case for your clients can be summarised succinctly as follows: broader diversification, access to opportunities public markets can’t offer, and a structure that’s worked for institutions for decades, now increasingly available to a wider range of investors.

None of this replaces your careful client-by-client judgement. Private markets will suit some clients well and others not at all; you are best placed to weigh liquidity needs, time horizon and cost against the potential benefits before making a recommendation.

However, for those clients where a private markets allocation makes sense, the opportunity is clear. What sophisticated institutional investors have been doing for decades is now within reach of a much wider range of clients through the right fund structures. Private markets have moved from the margins of institutional investing to a core part of how capital is being allocated; now they can form part of your investment strategy to be used to benefit clients.

 

Take the FAAA accredited quiz to earn 0.25 CPD hour:

CPD Quiz

The following CPD quiz is accredited by the FAAA at 0.25 hour.

Legislated CPD Area: Technical Competence (0.25 hrs)

ASIC Knowledge Requirements: Alternative Assets (0.25 hrs)

———–
Notes:
[1] Open Markets
[2] ASIC
[3] Investing.com
[4] Morningstar
[5]  Prequin
The information included in this article is provided for informational purposes only and is general advice only. It does not take into account an investor’s own objectives. The information contained in this article reflects, as of the date of publication, the current opinion of GSFM Pty Ltd and CI Global Asset Management and is subject to change without notice. Sources for the material contained in this article are deemed reliable but cannot be guaranteed. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our judgment at this date, are subject to change and should not be relied upon as the basis of your investment decisions. All reasonable care has been taken in producing the information set out in this article however subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information. Neither CI Global Asset Management, GSFM Pty Ltd, their related bodies nor associates gives any warranty nor makes any representation nor accepts responsibility for the accuracy or completeness of the information contained in this article.

The post CPD: Why private market assets belong in client portfolios appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/08/cpd-why-private-market-assets-belong-in-client-portfolios/feed/ 0 Inflation and the “new” Fed: livin’ under Kevin https://www.adviservoice.com.au/2026/07/inflation-and-the-new-fed-livin-under-kevin/ https://www.adviservoice.com.au/2026/07/inflation-and-the-new-fed-livin-under-kevin/#respond Thu, 16 Jul 2026 21:26:29 +0000 https://www.adviservoice.com.au/?p=112623

Stephen Miller

The financial market commentariat would have us believe that Federal Reserve Chair Warsh’s Congressional testimony was “hawkish”.

Fair enough! Despite a benign June consumer price index (CPI) report and last night’s benign producer price index (PPI) report, Warsh noted that it didn’t follow that it was ‘mission accomplished’ on inflation. He added for good measure that the Fed’s interest rate setting committee had ‘no tolerance for persistently elevated inflation’ and further, were united in ‘a resolute commitment to restoring price stability’.

I would note that it would be highly problematic for a central bank chair to communicate anything other than a ‘resolute commitment’ to fighting (what appears to be elevated and “sticky”) inflation.

Warsh gave nothing away regarding the likely Fed stance that will emerge from the next meeting of the Fed’s interest rate setting committee on July 28-29. (For what it is worth, markets dialled down their expectations of a tightening at the July meeting to a trivial level in the wake of the benign inflation reports but are still pricing slightly more than one further tightening before year-end).

All in all, Warsh’s comments are consistent with the notion that statements from this Fed Chair may well assume a more Delphic quality than that to which financial markets have become accustomed.

Warsh has indicated a strong antipathy for central bank “forward guidance” and by implication, the utility of the Fed’s “dot plot”. He did not submit a “plot” at the most recent Fed policy meeting and has made it clear that he doesn’t put too much store in the accuracy of the “plot”.

In essence, Warsh appears to doubt that the “dot plot” is additive to the information set of the Fed or markets. Indeed, he implies that in some instances the exercise is possessed of a certain disutility, insofar as such projections are innately ephemeral and create a damaging facade of an anchoring mechanism that bears no relation to unfolding reality.

In this sense it might be that to the extent that markets have inferred a tactical “hawkish” tilt under Warsh, it might be misplaced.

What Warsh has articulated is a desire to reframe the Fed’s strategic direction via the establishment of a series of taskforces covering communication, Fed balance sheet management, a review of data sources, productivity and jobs, and inflation drivers and measurement.

Having said that, to the extent that one could draw any conclusions regarding the benign June inflation reports it is that they appear to be some way from necessitating an increase in the Fed policy rate.

Inflation, however measured, is still north of the Fed’s 2 per cent target but looks to be trending (very grudgingly) downward despite tariff impacts and the surge in oil prices in the wake of the Iranian conflict. Of course, it might be argued that with respect to oil prices, the jury is still out when it comes to potential contagion effects on broader inflation and inflation expectations, particularly in the wake of the reescalation of the Iranian conflict.

The taskforces on productivity and jobs and price and inflation frameworks play into a theme that Warsh has in the past been quite vocal about. Specifically, Warsh conjectures that disinflation in the US will follow from tremendous (largely AI motivated) investment. In Warsh’s view that investment has wrought a productivity dividend that (other things equal) has raised the US economy’s “speed limit”. In other words, the US economy can grow at faster rate before igniting inflationary pressures.

The notion that AI driven productivity growth can constrain inflation is a credible – if debateable – position. Some worry that the huge capex requirements associated with AI might in the short-term put demand pressure on inflation.

What is also interesting is that when it comes to inflation measures, Warsh has indicated that he prefers the Dallas Fed trimmed-mean measure of the PCE. That measure was 2.4 per cent in in May, a full percentage point below the traditionally preferred core PCE at 3.4 per cent and occurs despite those aforementioned broad-based price pressures emanating from the Trump tariff agenda and oil price increases. Like other measures, the Dallas Fed inflation measure is still north of the Fed’s 2 per cent target for “inflation” but further away from mandating a policy rate increase than the traditionally preferred measure.

If that remains the case (an admittedly big “if”) and if Chairman Warsh can convince other FOMC members of the veracity of his viewpoint (a similarly big “if”) then a policy rate hike might be a more remote prospect than markets currently contemplate.

Further, Warsh’s more strategic focus might mean less frequent policy adjustments than have been seen in the past.

Instead, an extended period of a stable policy rate might be a more credible scenario.

By Stephen Miller, investment strategist

]]>

Stephen Miller

The financial market commentariat would have us believe that Federal Reserve Chair Warsh’s Congressional testimony was “hawkish”.

Fair enough! Despite a benign June consumer price index (CPI) report and last night’s benign producer price index (PPI) report, Warsh noted that it didn’t follow that it was ‘mission accomplished’ on inflation. He added for good measure that the Fed’s interest rate setting committee had ‘no tolerance for persistently elevated inflation’ and further, were united in ‘a resolute commitment to restoring price stability’.

I would note that it would be highly problematic for a central bank chair to communicate anything other than a ‘resolute commitment’ to fighting (what appears to be elevated and “sticky”) inflation.

Warsh gave nothing away regarding the likely Fed stance that will emerge from the next meeting of the Fed’s interest rate setting committee on July 28-29. (For what it is worth, markets dialled down their expectations of a tightening at the July meeting to a trivial level in the wake of the benign inflation reports but are still pricing slightly more than one further tightening before year-end).

All in all, Warsh’s comments are consistent with the notion that statements from this Fed Chair may well assume a more Delphic quality than that to which financial markets have become accustomed.

Warsh has indicated a strong antipathy for central bank “forward guidance” and by implication, the utility of the Fed’s “dot plot”. He did not submit a “plot” at the most recent Fed policy meeting and has made it clear that he doesn’t put too much store in the accuracy of the “plot”.

In essence, Warsh appears to doubt that the “dot plot” is additive to the information set of the Fed or markets. Indeed, he implies that in some instances the exercise is possessed of a certain disutility, insofar as such projections are innately ephemeral and create a damaging facade of an anchoring mechanism that bears no relation to unfolding reality.

In this sense it might be that to the extent that markets have inferred a tactical “hawkish” tilt under Warsh, it might be misplaced.

What Warsh has articulated is a desire to reframe the Fed’s strategic direction via the establishment of a series of taskforces covering communication, Fed balance sheet management, a review of data sources, productivity and jobs, and inflation drivers and measurement.

Having said that, to the extent that one could draw any conclusions regarding the benign June inflation reports it is that they appear to be some way from necessitating an increase in the Fed policy rate.

Inflation, however measured, is still north of the Fed’s 2 per cent target but looks to be trending (very grudgingly) downward despite tariff impacts and the surge in oil prices in the wake of the Iranian conflict. Of course, it might be argued that with respect to oil prices, the jury is still out when it comes to potential contagion effects on broader inflation and inflation expectations, particularly in the wake of the reescalation of the Iranian conflict.

The taskforces on productivity and jobs and price and inflation frameworks play into a theme that Warsh has in the past been quite vocal about. Specifically, Warsh conjectures that disinflation in the US will follow from tremendous (largely AI motivated) investment. In Warsh’s view that investment has wrought a productivity dividend that (other things equal) has raised the US economy’s “speed limit”. In other words, the US economy can grow at faster rate before igniting inflationary pressures.

The notion that AI driven productivity growth can constrain inflation is a credible – if debateable – position. Some worry that the huge capex requirements associated with AI might in the short-term put demand pressure on inflation.

What is also interesting is that when it comes to inflation measures, Warsh has indicated that he prefers the Dallas Fed trimmed-mean measure of the PCE. That measure was 2.4 per cent in in May, a full percentage point below the traditionally preferred core PCE at 3.4 per cent and occurs despite those aforementioned broad-based price pressures emanating from the Trump tariff agenda and oil price increases. Like other measures, the Dallas Fed inflation measure is still north of the Fed’s 2 per cent target for “inflation” but further away from mandating a policy rate increase than the traditionally preferred measure.

If that remains the case (an admittedly big “if”) and if Chairman Warsh can convince other FOMC members of the veracity of his viewpoint (a similarly big “if”) then a policy rate hike might be a more remote prospect than markets currently contemplate.

Further, Warsh’s more strategic focus might mean less frequent policy adjustments than have been seen in the past.

Instead, an extended period of a stable policy rate might be a more credible scenario.

By Stephen Miller, investment strategist

The post Inflation and the “new” Fed: livin’ under Kevin appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/07/inflation-and-the-new-fed-livin-under-kevin/feed/ 0 RBA minutes: stayin’ live https://www.adviservoice.com.au/2026/07/rba-minutes-stayin-live/ https://www.adviservoice.com.au/2026/07/rba-minutes-stayin-live/#respond Thu, 02 Jul 2026 21:15:46 +0000 https://www.adviservoice.com.au/?p=112353

Stephen Miller

I’m not sure that the news flow of the last week or so has managed to advance whatever one may have been thinking about the decision of the Reserve Bank of Australia (RBA) Monetary Policy Board (MPB) at its next meeting in August.

The minutes from the June meeting noted that policy was ‘somewhat’ restrictive but at the same time exhibited some handwringing around elevated inflation expectations. What might have been at the forefront of the RBA Board’s contemplations was the Fair Work Commission (FWC) decision to award a 4.75 per cent increase in the minimum wage and awards. That such an increase occurred against a backdrop of ongoing abject productivity growth and how it might inform wider wage negotiations is clearly a concern going forward.

The May monthly consumer price index report (CPI) was not as bad as feared and is probably consistent with the most recently issued RBA forecasts back in May.

Nevertheless, Australian inflation remains elevated. Trimmed-mean consumer price index (CPI) inflation in Australia is currently running at 3.6 per cent. That puts Australia at the top the developed country inflation league. That is not a (developed) World Cup we should want to win!

Some more positive news since the June meeting has been declining oil prices which might mitigate the dangers of oil price inflation broadening into something even more pernicious.

But Australia’s inflation problem is way more than just oil prices, as illustrated by the aforementioned adverse comparison of Australian inflation with elsewhere in the developed world.

Jim Chalmers might have us believe that the Middle-East tensions and the attendant ratcheting up of the price of oil is the primary driver of our current inflation challenge, and yes there is a skerrick of truth in that, at least in absolute terms.

But the stark reality is Australia has a structural homegrown inflation proclivity.

That homegrown structural inflation proclivity reflects, inter alia, the interplay of regulatory creep in labour and goods markets that impose costs on businesses, part of which are passed on to consumers. The regulatory regime is also reflected in the abject productivity growth which makes the task of inflation containment all the harder.

As I’ve stated in the past, this state of affairs is not just down to the current Federal Government. Rather it reflects a long-standing policy deficiency since the end of the Hawke-Keating and Howard-Costello eras. Governments (both State and Federal and Labor and Coalition) have long averted their eyes from addressing productivity enhancing policy measures. Just as importantly, little attention has been given to avoiding productivity diminishing measures attaching to (mostly well-intentioned but poorly thought out) regulatory oversight of labour and goods markets.

Sure, (to paraphrase the Prime Minister) people don’t sit around the kitchen table talking about low (or negative) productivity growth. But productivity remains central to enhancing standards of living not the least through mitigating inflation.

The decision to “pause and reflect” at the June meeting was understandable given concerns about looming cyclical fragility. In that context it reflected a view that there was some utility in using the “space” provided by preceding policy rate increases to assess how the economy was adjusting and the impact of disruptions.

However, both the RBA minutes and Governor Bullock’s comments would indicate that the policy rate might still need to be increased at a later date. That reflects, inter alia, governments’ inability to support the RBA’s inflation battle with supportive structural policies.

So, in determining the course of the policy rate over coming months, the RBA faces considerable challenges having to negotiate a tricky (dare I say “narrow”) path between structural inflation factors and cyclical fragility.

The June CPI release later this month looms as a key staging post in how the negotiation of that path may evolve.

Eurozone June “flash” CPI: ECB to stand pat in July

Overnight, Euro area CPI inflation for June came in a little lower than expected at 2.8 per cent at the headline level (compared with 3 per cent expected). The core reading was also better than expected at 2.4 per cent (2.6 per cent expected).

While inflation remains above the ECB target of 2 per cent, there now seems almost no prospect of a policy rate (deposit facility) increase from the current 2.25 per cent at the July 22-23rd meeting.

Speaking at the ECB’s Sintra Conference earlier in the week, ECB President Lagarde stated that she thought the ECB had gone some way to making the Eurozone economy less vulnerable to inflation shocks, perhaps reflecting a more rigorous financial framework.  She also noted that tensions in the Middle East had subsided (even if resolution was ‘far from assured’). Overnight at that same conference, Lagarde stated that she thought the risks to inflation and growth are ‘broadly balanced’ which would indicate that she sees no compelling case for a policy rate rise. (She also expressed a scepticism regarding the utility of “forward guidance” and other features of COVID era monetary policy such as “quantitative easing”.)

Other ECB decisionmakers are less sanguine.

Markets see the prospect of a hike in as closer to 30 per cent in September.

The latest set of ECB forecasts were based on Brent oil prices of around $US82 per barrel. It is currently at circa $US73 per barrel giving the ECB some “space” to digest whether further inflation pressures might necessitate a further increase.

Coming up: US non-farm payrolls tonight (ahead of Independence Day holiday)

As mentioned above, even more benign looking measures of inflation such as the Dallas Fed ‘s trimmed mean core PCE measure is, at was 2.4 per cent in May, still a way above the 2 per cent Fed “inflation” target.

And progress on the inflation front has been excruciatingly slow.

So absent some sharp and unforeseen deterioration in the labour market a policy rate cut hardly looks proximate.

Tonight sees the release of the June non-farm payrolls report ahead of Friday’s Independence Day holiday.

Indications are that the labour market remains in satisfactory condition.

The May Job Openings and Labor Turnover survey (JOLTs) report saw openings mostly unchanged at a healthy enough 7.6m.

The ADP June payrolls report showed a solid enough gain of 98k (even if lower than the 113k increase expected). The ADP report is sometimes dismissed (too easily in my view) because of its poor record in foreshadowing month-to-month movements in the Bureau of Labor Statistics payrolls measure. However, it is just as good a measure of the state of the labour market as the payrolls report.

The June Institute of Supply Management (ISM) manufacturing index (PMI) released overnight paints a reasonably satisfactory picture of the US manufacturing sector: the index coming in unchanged at 53.3. The employment component increased to to 49.7 from 48.6 in May (50.0 is the neutral point between expansion and contraction). The prices component declined to 73.0 from 82.1 in May. That is still elevated but maybe a harbinger of some easing of price pressures to come.  

A consensus outcome for payrolls of a circa 110k increase in employment and an unemployment rate unchanged at 4.3 per cent with average earnings growth of 3.5 per cent is not going to move the dial for any Fed members.

By Stephen Miller, investment strategist

]]>

Stephen Miller

I’m not sure that the news flow of the last week or so has managed to advance whatever one may have been thinking about the decision of the Reserve Bank of Australia (RBA) Monetary Policy Board (MPB) at its next meeting in August.

The minutes from the June meeting noted that policy was ‘somewhat’ restrictive but at the same time exhibited some handwringing around elevated inflation expectations. What might have been at the forefront of the RBA Board’s contemplations was the Fair Work Commission (FWC) decision to award a 4.75 per cent increase in the minimum wage and awards. That such an increase occurred against a backdrop of ongoing abject productivity growth and how it might inform wider wage negotiations is clearly a concern going forward.

The May monthly consumer price index report (CPI) was not as bad as feared and is probably consistent with the most recently issued RBA forecasts back in May.

Nevertheless, Australian inflation remains elevated. Trimmed-mean consumer price index (CPI) inflation in Australia is currently running at 3.6 per cent. That puts Australia at the top the developed country inflation league. That is not a (developed) World Cup we should want to win!

Some more positive news since the June meeting has been declining oil prices which might mitigate the dangers of oil price inflation broadening into something even more pernicious.

But Australia’s inflation problem is way more than just oil prices, as illustrated by the aforementioned adverse comparison of Australian inflation with elsewhere in the developed world.

Jim Chalmers might have us believe that the Middle-East tensions and the attendant ratcheting up of the price of oil is the primary driver of our current inflation challenge, and yes there is a skerrick of truth in that, at least in absolute terms.

But the stark reality is Australia has a structural homegrown inflation proclivity.

That homegrown structural inflation proclivity reflects, inter alia, the interplay of regulatory creep in labour and goods markets that impose costs on businesses, part of which are passed on to consumers. The regulatory regime is also reflected in the abject productivity growth which makes the task of inflation containment all the harder.

As I’ve stated in the past, this state of affairs is not just down to the current Federal Government. Rather it reflects a long-standing policy deficiency since the end of the Hawke-Keating and Howard-Costello eras. Governments (both State and Federal and Labor and Coalition) have long averted their eyes from addressing productivity enhancing policy measures. Just as importantly, little attention has been given to avoiding productivity diminishing measures attaching to (mostly well-intentioned but poorly thought out) regulatory oversight of labour and goods markets.

Sure, (to paraphrase the Prime Minister) people don’t sit around the kitchen table talking about low (or negative) productivity growth. But productivity remains central to enhancing standards of living not the least through mitigating inflation.

The decision to “pause and reflect” at the June meeting was understandable given concerns about looming cyclical fragility. In that context it reflected a view that there was some utility in using the “space” provided by preceding policy rate increases to assess how the economy was adjusting and the impact of disruptions.

However, both the RBA minutes and Governor Bullock’s comments would indicate that the policy rate might still need to be increased at a later date. That reflects, inter alia, governments’ inability to support the RBA’s inflation battle with supportive structural policies.

So, in determining the course of the policy rate over coming months, the RBA faces considerable challenges having to negotiate a tricky (dare I say “narrow”) path between structural inflation factors and cyclical fragility.

The June CPI release later this month looms as a key staging post in how the negotiation of that path may evolve.

Eurozone June “flash” CPI: ECB to stand pat in July

Overnight, Euro area CPI inflation for June came in a little lower than expected at 2.8 per cent at the headline level (compared with 3 per cent expected). The core reading was also better than expected at 2.4 per cent (2.6 per cent expected).

While inflation remains above the ECB target of 2 per cent, there now seems almost no prospect of a policy rate (deposit facility) increase from the current 2.25 per cent at the July 22-23rd meeting.

Speaking at the ECB’s Sintra Conference earlier in the week, ECB President Lagarde stated that she thought the ECB had gone some way to making the Eurozone economy less vulnerable to inflation shocks, perhaps reflecting a more rigorous financial framework.  She also noted that tensions in the Middle East had subsided (even if resolution was ‘far from assured’). Overnight at that same conference, Lagarde stated that she thought the risks to inflation and growth are ‘broadly balanced’ which would indicate that she sees no compelling case for a policy rate rise. (She also expressed a scepticism regarding the utility of “forward guidance” and other features of COVID era monetary policy such as “quantitative easing”.)

Other ECB decisionmakers are less sanguine.

Markets see the prospect of a hike in as closer to 30 per cent in September.

The latest set of ECB forecasts were based on Brent oil prices of around $US82 per barrel. It is currently at circa $US73 per barrel giving the ECB some “space” to digest whether further inflation pressures might necessitate a further increase.

Coming up: US non-farm payrolls tonight (ahead of Independence Day holiday)

As mentioned above, even more benign looking measures of inflation such as the Dallas Fed ‘s trimmed mean core PCE measure is, at was 2.4 per cent in May, still a way above the 2 per cent Fed “inflation” target.

And progress on the inflation front has been excruciatingly slow.

So absent some sharp and unforeseen deterioration in the labour market a policy rate cut hardly looks proximate.

Tonight sees the release of the June non-farm payrolls report ahead of Friday’s Independence Day holiday.

Indications are that the labour market remains in satisfactory condition.

The May Job Openings and Labor Turnover survey (JOLTs) report saw openings mostly unchanged at a healthy enough 7.6m.

The ADP June payrolls report showed a solid enough gain of 98k (even if lower than the 113k increase expected). The ADP report is sometimes dismissed (too easily in my view) because of its poor record in foreshadowing month-to-month movements in the Bureau of Labor Statistics payrolls measure. However, it is just as good a measure of the state of the labour market as the payrolls report.

The June Institute of Supply Management (ISM) manufacturing index (PMI) released overnight paints a reasonably satisfactory picture of the US manufacturing sector: the index coming in unchanged at 53.3. The employment component increased to to 49.7 from 48.6 in May (50.0 is the neutral point between expansion and contraction). The prices component declined to 73.0 from 82.1 in May. That is still elevated but maybe a harbinger of some easing of price pressures to come.  

A consensus outcome for payrolls of a circa 110k increase in employment and an unemployment rate unchanged at 4.3 per cent with average earnings growth of 3.5 per cent is not going to move the dial for any Fed members.

By Stephen Miller, investment strategist

The post RBA minutes: stayin’ live appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/07/rba-minutes-stayin-live/feed/ 0 CPD: Capitalising on global growth in the decarbonisation era https://www.adviservoice.com.au/2026/07/cpd-capitalising-on-global-growth-in-the-decarbonisation-era/ https://www.adviservoice.com.au/2026/07/cpd-capitalising-on-global-growth-in-the-decarbonisation-era/#respond Wed, 01 Jul 2026 21:30:31 +0000 https://www.adviservoice.com.au/?p=112190

Decarbonisation is reshaping the global economy, creating long-term investment opportunities across clean energy, energy efficiency, circular economy infrastructure and climate-driven innovation.

Few themes rival the scale, urgency and long-term significance of climate change. Consequently, regions, countries, companies and individuals are taking positive action to decarbonise the planet and work toward net zero 2050 goals. For growth equity investors, decarbonisation is not simply a regulatory obligation or a moral imperative. It is the single largest, earnings-driven wealth-creation opportunity of our generation.

Decarbonisation has crossed the threshold from future ambition to today’s dominant economic reality, propelled by an unprecedented alignment of policy, corporate capital and investor mandate. With over 90 percent of global GDP now bound to net-zero targets, the regulatory floor has permanently shifted.

Corporate giants like Microsoft, Walmart and Samsung are no longer just making promises, they are deploying hundreds of billions of dollars to re-engineer supply chains, lock down clean energy grids and build climate-resilient operations. For investors, this isn’t a passive ESG checkbox; it is a directive to deploy capital into the businesses driving this structural transformation.

Yet, transitioning the global economy is a monumental task. Hitting terminal climate targets requires an enormous, sustained capital expenditure cycle across every major sector. While early market attention focused heavily on renewable energy and electric vehicles, the next phase of growth is far more diverse. The most compelling, earnings-driven opportunities now span critical, high-barrier sectors including advanced nuclear energy, energy efficiency and circular economy infrastructure.

Climate and the S-curve

Climate is not a cyclical trend; it is a permanent structural rewrite of the global economy that will span decades. Achieving net-zero emissions by mid-century will require estimated capital in excess of US$50 trillion. For growth investors, the critical question is no longer whether this capital allocation will happen, but rather, which companies will capture the lion’s share.

To reinforce the opportunity available to investors, one only needs to look at climate’s S-curve.

The S-curve models how an investment theme, such as climate, moves from niche concept to dominant market standard. Rather than a straight line, the S-curve breaks down into three distinct structural components, each representing a critical phase in that thematic’s lifecycle.

  • Incubation phase – at the bottom of the curve, pioneering technologies often face high initial capital costs, regulatory bottlenecks and steep engineering hurdles.
  • Inflection and acceleration – once a technology hits commercial viability it crosses a critical threshold. Costs drop, demand surges and growth enters a hyper-accelerated phase. The most resilient compounders in a global growth portfolio capitalise on this multi-year runway, scaling their total addressable market and generating durable earnings growth.
  • Saturation – eventually, the curve flattens. The market matures, competition intensifies and incremental gains become harder to secure.

As illustrated in figure one, climate and related decarbonisation technologies are right at the start of the S-Curve. This means a long runway of growth, significant earnings growth potential and ultimately, positive contribution to investor portfolios.

Driving forces of the climate transition

This massive macroeconomic shift is sustained by an interlocking trio of structural drivers (figure two):

  • Geopolitical policy and mandates – subsidies, tax incentives and regulatory penalties are setting a permanent economic floor for green tech adoption.
  • Corporate capex reallocation – market leaders are proactively deploying hundreds of billions to future-proof their supply chains and operational resilience.
  • Investor capital mandates – institutional asset allocation is permanently shifting, starving carbon-heavy legacy businesses of capital while rewarding green compounders.

Crucially, these three forces do not operate in isolation. They form a self-reinforcing feedback loop that creates a multi-decade compounding tailwind for the high-growth companies anchoring the transition. Let’s examine each of these tailwinds in greater detail.

Geopolitical policy – the foundation for action

Over the past decade, climate policies have evolved from aspirational targets to enforceable regulations, reshaping entire industries. The Paris Agreement set the global benchmark for emissions reduction, while COP28 reinforced the ambition with commitments to triple renewable energy capacity by 2030 and nuclear energy by 2050.

National policies are now following suit. The Inflation Reduction Act in the United States – despite some rollbacks from President Trump in the ‘One Big Beautiful Bill’ in July 2025 – and the European Union’s Green Deal are directing hundreds of billions of dollars in public support and mobilising trillions in total investment toward clean energy, electrification and industrial decarbonisation.

While the political landscape varies by region, the trend is clear – governments are using regulation, financial incentives and carbon pricing to steer capital toward low-emissions technologies. Countries representing more than 90 percent of global GDP have now adopted net-zero targets, up from roughly 16 percent in 2019[1].

The scale of these policy-driven investment flows is accelerating the adoption of renewables, grid infrastructure, energy storage and efficiency technologies, thereby reinforcing the case for long-term structural growth.

Corporate leadership and capex reallocation

While government policy is providing the framework for the energy transition, corporate capital is increasingly driving its implementation. Some of the world’s largest companies are investing directly in renewable and low-carbon energy sources, including nuclear power, while securing long-term power purchase agreements (PPAs) to guarantee access to reliable, carbon-free electricity.

These investments are motivated by more than sustainability objectives. The rapid growth of AI, data centres and electrification are creating unprecedented demand for power, making energy security and affordability strategic priorities for businesses. At the same time, commercial property owners and industrial operators are investing in energy-efficient infrastructure. This ranges from HVAC systems, insulation and building upgrades, to lower operating costs and reduce emissions.

Together, these trends reflect a fundamental shift in corporate climate strategy. Rather than relying primarily on carbon offsets, businesses are embedding decarbonisation into their operations, supply chains and physical assets. This is creating growing demand for the technologies and infrastructure needed to support a lower-carbon economy, from energy storage and grid modernisation to advanced efficiency solutions.

Investor influence – capital allocation as a force for change

The financial sector is playing a critical role in accelerating the climate transition. Global investment in the energy transition reached a record US$2.3 trillion in 2025, up 8 percent from the previous year, with capital flowing into renewable energy, electrified transport, power grids, energy storage and other decarbonisation technologies[2]. This demonstrates a compelling investment opportunity.

ESG strategies have shifted from passive screening to active capital deployment. Instead of just picking companies that already boast low emissions, forward-thinking investors are targeting the enablers of true decarbonisation – those scaling clean power, advancing the circular economy and maximising energy efficiency.

Concurrently, shareholder pressure is intensifying. Businesses face mounting demands to lock in emissions targets, boost transparency and clean up their supply chains. In short: climate risk is now a core financial risk, and laggards are losing their competitive edge.

Climate investing does not always mean avoiding high-emissions companies altogether. Some of the most critical investment opportunities lie in companies with significant carbon footprints that are leading their industries in decarbonisation – whether by transitioning to clean energy, adopting breakthrough efficiency technologies or setting ambitious emissions reduction targets. These businesses may not be low carbon today but their role in transforming industrial processes, power generation, and heavy transport is essential to reaching net zero.

Opportunities within climate: four key sub-themes

Within its climate fund, Munro Partners focuses on four key sub-themes: clean energy, energy efficiency, the circular economy and clean transport.

Clean energy – the foundation of decarbonisation

Clean energy is essential to reaching net zero. However, not all clean energy investments are created equal. Renewables like solar and wind are now well established, but they face increasing commoditisation, intense competition and supply chain risks. For example, Chinese dominance in solar panel manufacturing has driven prices lower and squeezed profit margins, making these investments less attractive. Meanwhile, the dependence of renewables on weather conditions means they cannot meet rising energy demand alone. Regardless of this, solar and onshore wind are on the trajectory to be the more cost competitive energy technologies globally[3].

Nuclear energy, on the other hand, is seeing a resurgence as a reliable, carbon-free baseload power source. Hyper scalers, including Microsoft and Amazon, are actively securing long-term nuclear power contracts to meet their sustainability commitments and ensure a stable energy supply for their AI-driven data centres. While small modular reactors (SMRs) hold promise, their commercial deployment is still in the early stages and likely won’t scale until the 2030s.

While power generation is vital, a highly compelling investment opportunity exists in energy enablers. These companies provide the grid upgrades, energy storage and critical infrastructure required to seamlessly integrate renewable and nuclear power into the broader energy ecosystem.

Stock story: CATL (China)

Contemporary Amperex Technology Co. Limited (CATL) is the world’s largest battery manufacturer. holding a 39.2 percent global market share in electric vehicle (EV) batteries and 30.4 percent in grid-scale Energy Storage Systems (ESS) according to 2025 data from SNE Research. To sustain growth, the company is diversifying away from pure automotive dependency into higher-margin utility-scale storage, driven by surging AI data centre energy demands, alongside electric shipping and aviation.

Energy efficiency – the unsung hero of decarbonisation

Despite being an overlooked climate asset, energy efficiency outperformed renewables in reducing US emissions over the past decade. By eliminating demand at the source rather than just decarbonising supply, efficiency solutions deliver a dual advantage: immediate cost savings and structural emissions reductions.

Buildings alone account for nearly 40 percent of global energy use, making HVAC systems, insulation and energy management software critical areas of investment. With short payback periods – often under two years – energy efficiency solutions represent one of the fastest-growing and most financially attractive areas of climate investment.

Industrial energy efficiency is becoming a major investment theme. Technologies such as industrial process optimisation, heat pumps and waste heat recovery are improving operational efficiency in manufacturing, logistics and data centres.

Circular economy – reducing waste, increasing sustainability

The transition to a sustainable economy is also about redefining how we use materials. The circular economy focuses on waste reduction, increased recycling and the creation of more sustainable production systems.

Plastics, industrial waste and water scarcity present some of the biggest environmental challenges today. Companies involved in waste management, advanced recycling and water treatment solutions are seeing rising demand, particularly as corporate and government policies push for higher sustainability standards in packaging and industrial processes.

Beyond traditional waste management, innovation in alternative materials – such as bio-based plastics, low carbon cement and synthetic fuels – is opening new investment opportunities. These industries are still in the early stages, but they are set to grow as global supply chains adapt to increasing regulatory and consumer pressure.

Stock story: Clean Harbours (United States)

Clean Harbors is North America’s largest environmental services provider and a primary executor of the industrial circular economy. Through its Safety-Kleen subsidiary, the company operates a closed-loop infrastructure network that processes hundreds of millions of gallons of hazardous waste and used motor oil annually. Clean Harbors collects roughly one out of every five gallons of waste oil in North America, re-refining it into high-quality base oils and lubricants that require up to 85% less energy to produce than crude oil alternatives. The company’s recycling volumes reached 1.9 million metric tons in 2024, clearing its 2030 target years ahead of schedule[4].

For investors, this asset-heavy infrastructure creates a significant competitive moat; the company leverages recurring service revenues from a diverse corporate customer base to drive compounding free cash flow, capitalising directly on rising corporate ESG mandates and supply chain reshoring trends.

Clean transport – beyond the EV

The rise of electric vehicles (EVs) is one of the most visible shifts in the climate transition, but the investment case for direct EV exposure is becoming more complex. A combination of oversupply, slowing demand and aggressive competition from China has put pressure on automakers, making investments less compelling in the short term.

However, the broader clean transport ecosystem remains an attractive investment theme. The supply chain behind EVs – including battery materials, charging infrastructure and grid integration technologies – continues to grow as electrification expands across passenger vehicles, trucks and public transport.

At the same time, low-carbon fuels, hydrogen, and sustainable aviation solutions are emerging as potential areas for future investment, particularly in industries where electrification is not yet viable.

Looking ahead: emerging drivers and innovations

Decarbonisation is accelerating, shifting climate investing beyond its first generation. Investors must look past standard renewables and efficiency to capture emerging opportunities driven by changing energy grid dynamics, new technology deployment, and shifting corporate sustainability mandates.

The rapid adoption of artificial intelligence is reshaping global energy consumption. AI workloads are significantly more power-intensive than traditional computing, and as businesses deploy AI at scale, data centre electricity demand is set to surge.

According to the International Energy Agency (IEA), total global electricity consumption from data centres is projected to roughly double by 2030, climbing from 485 terawatt-hours (TWh) to 950 TWh, accounting for approximately 3 percent of global electricity demand. Notably, power consumption from data centres specifically focused on AI is poised to triple, reaching 465 TWh by 2030 to nearly match the energy footprint of conventional data centres[5].

AI is also playing a role in energy efficiency and grid optimisation. Machine learning models are being used to improve electricity demand forecasting, enhance battery storage performance and increase the efficiency of industrial and building energy systems. While AI is accelerating the need for clean power, it is also emerging as a key enabler of smarter energy use.

At the same time, heavy industry is undergoing a structural shift. New industrial technologies are emerging – from green steel and cement to low-carbon chemical production – driven by both regulation and corporate commitments to reduce supply chain emissions. While these areas are still in the early stages, they may represent the next major investment wave in the climate transition.

The transition to net zero will fluctuate rather than progress in a straight line, dictated by changing political landscapes, technological breakthroughs and shifting consumer behaviour. Yet the macro trajectory remains undeniable. Capital allocation from both public and private sectors is steadily flowing into decarbonisation, targeted directly at upgrading energy infrastructure, scaling efficiency tech and modernising resource management.

For forward-looking investors, the climate transition has transcended ethical necessity to become a structural economic theme defining the 21st century. This systemic shift is already reshaping global industries and is unlocking substantial value across energy, transport agriculture and finance. Driven by tightening regulatory mandates, shifting consumer preferences and institutional capital favouring sustainable assets, the financial momentum behind decarbonisation will continue to compound.

 

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———–
References:
[1] https://zerotracker.net/
[2] BloombergNEF, Energy Transition Investment Trends 2025
[3] Wood Mackenzie, Global competitiveness of renewable LCOE continues to accelerate
[4] https://resource-recycling.com/plastics/2025/09/24/clean-harbors-hits-2030-recycling-goal-early/
[5] Key Questions on Energy and AI, International Energy Agency, April 2026
The information included in this article is provided for informational purposes only and is general advice only. It does not take into account an investor’s own objectives. The information contained in this article reflects, as of the date of publication, the current opinion of Munro Partners and is subject to change without notice. Sources for the material contained in this article are deemed reliable but cannot be guaranteed. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our judgment at this date, are subject to change and should not be relied upon as the basis of your investment decisions. All reasonable care has been taken in producing the information set out in this article however subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information. Neither Munro Partners, GSFM Pty Ltd, their related bodies nor associates gives any warranty nor makes any representation nor accepts responsibility for the accuracy or completeness of the information contained in this article.
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Decarbonisation is reshaping the global economy, creating long-term investment opportunities across clean energy, energy efficiency, circular economy infrastructure and climate-driven innovation.

Few themes rival the scale, urgency and long-term significance of climate change. Consequently, regions, countries, companies and individuals are taking positive action to decarbonise the planet and work toward net zero 2050 goals. For growth equity investors, decarbonisation is not simply a regulatory obligation or a moral imperative. It is the single largest, earnings-driven wealth-creation opportunity of our generation.

Decarbonisation has crossed the threshold from future ambition to today’s dominant economic reality, propelled by an unprecedented alignment of policy, corporate capital and investor mandate. With over 90 percent of global GDP now bound to net-zero targets, the regulatory floor has permanently shifted.

Corporate giants like Microsoft, Walmart and Samsung are no longer just making promises, they are deploying hundreds of billions of dollars to re-engineer supply chains, lock down clean energy grids and build climate-resilient operations. For investors, this isn’t a passive ESG checkbox; it is a directive to deploy capital into the businesses driving this structural transformation.

Yet, transitioning the global economy is a monumental task. Hitting terminal climate targets requires an enormous, sustained capital expenditure cycle across every major sector. While early market attention focused heavily on renewable energy and electric vehicles, the next phase of growth is far more diverse. The most compelling, earnings-driven opportunities now span critical, high-barrier sectors including advanced nuclear energy, energy efficiency and circular economy infrastructure.

Climate and the S-curve

Climate is not a cyclical trend; it is a permanent structural rewrite of the global economy that will span decades. Achieving net-zero emissions by mid-century will require estimated capital in excess of US$50 trillion. For growth investors, the critical question is no longer whether this capital allocation will happen, but rather, which companies will capture the lion’s share.

To reinforce the opportunity available to investors, one only needs to look at climate’s S-curve.

The S-curve models how an investment theme, such as climate, moves from niche concept to dominant market standard. Rather than a straight line, the S-curve breaks down into three distinct structural components, each representing a critical phase in that thematic’s lifecycle.

  • Incubation phase – at the bottom of the curve, pioneering technologies often face high initial capital costs, regulatory bottlenecks and steep engineering hurdles.
  • Inflection and acceleration – once a technology hits commercial viability it crosses a critical threshold. Costs drop, demand surges and growth enters a hyper-accelerated phase. The most resilient compounders in a global growth portfolio capitalise on this multi-year runway, scaling their total addressable market and generating durable earnings growth.
  • Saturation – eventually, the curve flattens. The market matures, competition intensifies and incremental gains become harder to secure.

As illustrated in figure one, climate and related decarbonisation technologies are right at the start of the S-Curve. This means a long runway of growth, significant earnings growth potential and ultimately, positive contribution to investor portfolios.

Driving forces of the climate transition

This massive macroeconomic shift is sustained by an interlocking trio of structural drivers (figure two):

  • Geopolitical policy and mandates – subsidies, tax incentives and regulatory penalties are setting a permanent economic floor for green tech adoption.
  • Corporate capex reallocation – market leaders are proactively deploying hundreds of billions to future-proof their supply chains and operational resilience.
  • Investor capital mandates – institutional asset allocation is permanently shifting, starving carbon-heavy legacy businesses of capital while rewarding green compounders.

Crucially, these three forces do not operate in isolation. They form a self-reinforcing feedback loop that creates a multi-decade compounding tailwind for the high-growth companies anchoring the transition. Let’s examine each of these tailwinds in greater detail.

Geopolitical policy – the foundation for action

Over the past decade, climate policies have evolved from aspirational targets to enforceable regulations, reshaping entire industries. The Paris Agreement set the global benchmark for emissions reduction, while COP28 reinforced the ambition with commitments to triple renewable energy capacity by 2030 and nuclear energy by 2050.

National policies are now following suit. The Inflation Reduction Act in the United States – despite some rollbacks from President Trump in the ‘One Big Beautiful Bill’ in July 2025 – and the European Union’s Green Deal are directing hundreds of billions of dollars in public support and mobilising trillions in total investment toward clean energy, electrification and industrial decarbonisation.

While the political landscape varies by region, the trend is clear – governments are using regulation, financial incentives and carbon pricing to steer capital toward low-emissions technologies. Countries representing more than 90 percent of global GDP have now adopted net-zero targets, up from roughly 16 percent in 2019[1].

The scale of these policy-driven investment flows is accelerating the adoption of renewables, grid infrastructure, energy storage and efficiency technologies, thereby reinforcing the case for long-term structural growth.

Corporate leadership and capex reallocation

While government policy is providing the framework for the energy transition, corporate capital is increasingly driving its implementation. Some of the world’s largest companies are investing directly in renewable and low-carbon energy sources, including nuclear power, while securing long-term power purchase agreements (PPAs) to guarantee access to reliable, carbon-free electricity.

These investments are motivated by more than sustainability objectives. The rapid growth of AI, data centres and electrification are creating unprecedented demand for power, making energy security and affordability strategic priorities for businesses. At the same time, commercial property owners and industrial operators are investing in energy-efficient infrastructure. This ranges from HVAC systems, insulation and building upgrades, to lower operating costs and reduce emissions.

Together, these trends reflect a fundamental shift in corporate climate strategy. Rather than relying primarily on carbon offsets, businesses are embedding decarbonisation into their operations, supply chains and physical assets. This is creating growing demand for the technologies and infrastructure needed to support a lower-carbon economy, from energy storage and grid modernisation to advanced efficiency solutions.

Investor influence – capital allocation as a force for change

The financial sector is playing a critical role in accelerating the climate transition. Global investment in the energy transition reached a record US$2.3 trillion in 2025, up 8 percent from the previous year, with capital flowing into renewable energy, electrified transport, power grids, energy storage and other decarbonisation technologies[2]. This demonstrates a compelling investment opportunity.

ESG strategies have shifted from passive screening to active capital deployment. Instead of just picking companies that already boast low emissions, forward-thinking investors are targeting the enablers of true decarbonisation – those scaling clean power, advancing the circular economy and maximising energy efficiency.

Concurrently, shareholder pressure is intensifying. Businesses face mounting demands to lock in emissions targets, boost transparency and clean up their supply chains. In short: climate risk is now a core financial risk, and laggards are losing their competitive edge.

Climate investing does not always mean avoiding high-emissions companies altogether. Some of the most critical investment opportunities lie in companies with significant carbon footprints that are leading their industries in decarbonisation – whether by transitioning to clean energy, adopting breakthrough efficiency technologies or setting ambitious emissions reduction targets. These businesses may not be low carbon today but their role in transforming industrial processes, power generation, and heavy transport is essential to reaching net zero.

Opportunities within climate: four key sub-themes

Within its climate fund, Munro Partners focuses on four key sub-themes: clean energy, energy efficiency, the circular economy and clean transport.

Clean energy – the foundation of decarbonisation

Clean energy is essential to reaching net zero. However, not all clean energy investments are created equal. Renewables like solar and wind are now well established, but they face increasing commoditisation, intense competition and supply chain risks. For example, Chinese dominance in solar panel manufacturing has driven prices lower and squeezed profit margins, making these investments less attractive. Meanwhile, the dependence of renewables on weather conditions means they cannot meet rising energy demand alone. Regardless of this, solar and onshore wind are on the trajectory to be the more cost competitive energy technologies globally[3].

Nuclear energy, on the other hand, is seeing a resurgence as a reliable, carbon-free baseload power source. Hyper scalers, including Microsoft and Amazon, are actively securing long-term nuclear power contracts to meet their sustainability commitments and ensure a stable energy supply for their AI-driven data centres. While small modular reactors (SMRs) hold promise, their commercial deployment is still in the early stages and likely won’t scale until the 2030s.

While power generation is vital, a highly compelling investment opportunity exists in energy enablers. These companies provide the grid upgrades, energy storage and critical infrastructure required to seamlessly integrate renewable and nuclear power into the broader energy ecosystem.

Stock story: CATL (China)

Contemporary Amperex Technology Co. Limited (CATL) is the world’s largest battery manufacturer. holding a 39.2 percent global market share in electric vehicle (EV) batteries and 30.4 percent in grid-scale Energy Storage Systems (ESS) according to 2025 data from SNE Research. To sustain growth, the company is diversifying away from pure automotive dependency into higher-margin utility-scale storage, driven by surging AI data centre energy demands, alongside electric shipping and aviation.

Energy efficiency – the unsung hero of decarbonisation

Despite being an overlooked climate asset, energy efficiency outperformed renewables in reducing US emissions over the past decade. By eliminating demand at the source rather than just decarbonising supply, efficiency solutions deliver a dual advantage: immediate cost savings and structural emissions reductions.

Buildings alone account for nearly 40 percent of global energy use, making HVAC systems, insulation and energy management software critical areas of investment. With short payback periods – often under two years – energy efficiency solutions represent one of the fastest-growing and most financially attractive areas of climate investment.

Industrial energy efficiency is becoming a major investment theme. Technologies such as industrial process optimisation, heat pumps and waste heat recovery are improving operational efficiency in manufacturing, logistics and data centres.

Circular economy – reducing waste, increasing sustainability

The transition to a sustainable economy is also about redefining how we use materials. The circular economy focuses on waste reduction, increased recycling and the creation of more sustainable production systems.

Plastics, industrial waste and water scarcity present some of the biggest environmental challenges today. Companies involved in waste management, advanced recycling and water treatment solutions are seeing rising demand, particularly as corporate and government policies push for higher sustainability standards in packaging and industrial processes.

Beyond traditional waste management, innovation in alternative materials – such as bio-based plastics, low carbon cement and synthetic fuels – is opening new investment opportunities. These industries are still in the early stages, but they are set to grow as global supply chains adapt to increasing regulatory and consumer pressure.

Stock story: Clean Harbours (United States)

Clean Harbors is North America’s largest environmental services provider and a primary executor of the industrial circular economy. Through its Safety-Kleen subsidiary, the company operates a closed-loop infrastructure network that processes hundreds of millions of gallons of hazardous waste and used motor oil annually. Clean Harbors collects roughly one out of every five gallons of waste oil in North America, re-refining it into high-quality base oils and lubricants that require up to 85% less energy to produce than crude oil alternatives. The company’s recycling volumes reached 1.9 million metric tons in 2024, clearing its 2030 target years ahead of schedule[4].

For investors, this asset-heavy infrastructure creates a significant competitive moat; the company leverages recurring service revenues from a diverse corporate customer base to drive compounding free cash flow, capitalising directly on rising corporate ESG mandates and supply chain reshoring trends.

Clean transport – beyond the EV

The rise of electric vehicles (EVs) is one of the most visible shifts in the climate transition, but the investment case for direct EV exposure is becoming more complex. A combination of oversupply, slowing demand and aggressive competition from China has put pressure on automakers, making investments less compelling in the short term.

However, the broader clean transport ecosystem remains an attractive investment theme. The supply chain behind EVs – including battery materials, charging infrastructure and grid integration technologies – continues to grow as electrification expands across passenger vehicles, trucks and public transport.

At the same time, low-carbon fuels, hydrogen, and sustainable aviation solutions are emerging as potential areas for future investment, particularly in industries where electrification is not yet viable.

Looking ahead: emerging drivers and innovations

Decarbonisation is accelerating, shifting climate investing beyond its first generation. Investors must look past standard renewables and efficiency to capture emerging opportunities driven by changing energy grid dynamics, new technology deployment, and shifting corporate sustainability mandates.

The rapid adoption of artificial intelligence is reshaping global energy consumption. AI workloads are significantly more power-intensive than traditional computing, and as businesses deploy AI at scale, data centre electricity demand is set to surge.

According to the International Energy Agency (IEA), total global electricity consumption from data centres is projected to roughly double by 2030, climbing from 485 terawatt-hours (TWh) to 950 TWh, accounting for approximately 3 percent of global electricity demand. Notably, power consumption from data centres specifically focused on AI is poised to triple, reaching 465 TWh by 2030 to nearly match the energy footprint of conventional data centres[5].

AI is also playing a role in energy efficiency and grid optimisation. Machine learning models are being used to improve electricity demand forecasting, enhance battery storage performance and increase the efficiency of industrial and building energy systems. While AI is accelerating the need for clean power, it is also emerging as a key enabler of smarter energy use.

At the same time, heavy industry is undergoing a structural shift. New industrial technologies are emerging – from green steel and cement to low-carbon chemical production – driven by both regulation and corporate commitments to reduce supply chain emissions. While these areas are still in the early stages, they may represent the next major investment wave in the climate transition.

The transition to net zero will fluctuate rather than progress in a straight line, dictated by changing political landscapes, technological breakthroughs and shifting consumer behaviour. Yet the macro trajectory remains undeniable. Capital allocation from both public and private sectors is steadily flowing into decarbonisation, targeted directly at upgrading energy infrastructure, scaling efficiency tech and modernising resource management.

For forward-looking investors, the climate transition has transcended ethical necessity to become a structural economic theme defining the 21st century. This systemic shift is already reshaping global industries and is unlocking substantial value across energy, transport agriculture and finance. Driven by tightening regulatory mandates, shifting consumer preferences and institutional capital favouring sustainable assets, the financial momentum behind decarbonisation will continue to compound.

 

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References:
[1] https://zerotracker.net/
[2] BloombergNEF, Energy Transition Investment Trends 2025
[3] Wood Mackenzie, Global competitiveness of renewable LCOE continues to accelerate
[4] https://resource-recycling.com/plastics/2025/09/24/clean-harbors-hits-2030-recycling-goal-early/
[5] Key Questions on Energy and AI, International Energy Agency, April 2026
The information included in this article is provided for informational purposes only and is general advice only. It does not take into account an investor’s own objectives. The information contained in this article reflects, as of the date of publication, the current opinion of Munro Partners and is subject to change without notice. Sources for the material contained in this article are deemed reliable but cannot be guaranteed. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our judgment at this date, are subject to change and should not be relied upon as the basis of your investment decisions. All reasonable care has been taken in producing the information set out in this article however subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information. Neither Munro Partners, GSFM Pty Ltd, their related bodies nor associates gives any warranty nor makes any representation nor accepts responsibility for the accuracy or completeness of the information contained in this article.

The post CPD: Capitalising on global growth in the decarbonisation era appeared first on AdviserVoice.

]]> https://www.adviservoice.com.au/2026/07/cpd-capitalising-on-global-growth-in-the-decarbonisation-era/feed/ 0 Private markets becoming a core allocation as listed markets narrow https://www.adviservoice.com.au/2026/07/private-markets-becoming-a-core-allocation-as-listed-markets-narrow/ https://www.adviservoice.com.au/2026/07/private-markets-becoming-a-core-allocation-as-listed-markets-narrow/#respond Tue, 30 Jun 2026 21:25:24 +0000 https://www.adviservoice.com.au/?p=112298

Damien McIntyre

Structural changes in global capital markets have reshaped the investment landscape, and investors are increasingly viewing private markets as a core portfolio allocation, according to GSFM CEO, Damien McIntyre.

But as private markets continue to mature, manager selection and portfolio construction will become even more important, McIntyre says.

“Private markets are no longer a niche allocation reserved for large institutions. More companies are choosing to stay private for longer, meaning investors relying solely on listed markets are accessing a smaller proportion of the global opportunity set.”

McIntyre says private markets now encompass a broad range of asset classes, including private equity, private credit, infrastructure, real estate and venture capital, providing investors with additional sources of diversification and return.

“By investing across all private markets, it is possible to build more resilient portfolios by accessing investments that are driven by different fundamentals to listed markets.”

McIntyre says it is not surprising that investor interest in private markets had accelerated in recent years.

“The market volatility experienced during 2022 reminded investors that traditional diversification doesn’t always work as expected,” he says.

“Public companies often operate under an intense 90-day reporting cycle,” he explains.

“Private market investments tend to be valued on underlying business fundamentals rather than daily market sentiment, reducing the impact of short-term noise and allowing managers to focus on long-term value creation.

“Private ownership allows businesses to focus on improving operations, investing for growth and creating value over several years rather than managing for the next quarterly result.

“The advantage is that management teams have ability to execute long-term strategies without the pressure of meeting quarterly earnings expectations that comes with listed markets.”

But McIntyre says manager selection is an important element of successful private market investing.

“The dispersion between top-performing and average managers in private markets is significantly wider than in listed markets, making manager selection a key driver of long-term returns.”

Rather than concentrating exposure in a single private asset class, McIntyre said the CI Global Private Markets Funds take an approach that combines private equity, private credit, infrastructure, real estate and venture capital within a diversified portfolio framework.

“The approach is to diversify across managers, asset classes, investment vintages and liquidity profiles,” he says.

“This provides investors with exposure to the breadth of opportunities available across private markets while helping manage portfolio risk.”

This is not to say that listed markets do not have a place.

“The role of private markets isn’t to replace listed investments but to complement them, improving diversification and potentially increasing long-term risk-adjusted returns.”

]]>

Damien McIntyre

Structural changes in global capital markets have reshaped the investment landscape, and investors are increasingly viewing private markets as a core portfolio allocation, according to GSFM CEO, Damien McIntyre.

But as private markets continue to mature, manager selection and portfolio construction will become even more important, McIntyre says.

“Private markets are no longer a niche allocation reserved for large institutions. More companies are choosing to stay private for longer, meaning investors relying solely on listed markets are accessing a smaller proportion of the global opportunity set.”

McIntyre says private markets now encompass a broad range of asset classes, including private equity, private credit, infrastructure, real estate and venture capital, providing investors with additional sources of diversification and return.

“By investing across all private markets, it is possible to build more resilient portfolios by accessing investments that are driven by different fundamentals to listed markets.”

McIntyre says it is not surprising that investor interest in private markets had accelerated in recent years.

“The market volatility experienced during 2022 reminded investors that traditional diversification doesn’t always work as expected,” he says.

“Public companies often operate under an intense 90-day reporting cycle,” he explains.

“Private market investments tend to be valued on underlying business fundamentals rather than daily market sentiment, reducing the impact of short-term noise and allowing managers to focus on long-term value creation.

“Private ownership allows businesses to focus on improving operations, investing for growth and creating value over several years rather than managing for the next quarterly result.

“The advantage is that management teams have ability to execute long-term strategies without the pressure of meeting quarterly earnings expectations that comes with listed markets.”

But McIntyre says manager selection is an important element of successful private market investing.

“The dispersion between top-performing and average managers in private markets is significantly wider than in listed markets, making manager selection a key driver of long-term returns.”

Rather than concentrating exposure in a single private asset class, McIntyre said the CI Global Private Markets Funds take an approach that combines private equity, private credit, infrastructure, real estate and venture capital within a diversified portfolio framework.

“The approach is to diversify across managers, asset classes, investment vintages and liquidity profiles,” he says.

“This provides investors with exposure to the breadth of opportunities available across private markets while helping manage portfolio risk.”

This is not to say that listed markets do not have a place.

“The role of private markets isn’t to replace listed investments but to complement them, improving diversification and potentially increasing long-term risk-adjusted returns.”

The post Private markets becoming a core allocation as listed markets narrow appeared first on AdviserVoice.

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