Ali Dibadj

Janus Henderson, a leading global active asset manager, today announced it is building a suite of AI-native tools to transform how it invests for and serves its clients, with Percepta, a General Catalyst transformation company, building the infrastructure and Anthropic’s Claude serving as the AI model layer.

Janus Henderson manages nearly half a trillion dollars in assets for 75 million* clients worldwide, dedicating itself to helping clients define and achieve superior financial outcomes through differentiated insights, disciplined investments, and world-class service. The firm’s view is that cutting-edge AI is most impactful when it enhances human expertise, empowering an even greater client-centric focus on investment and client service, which has differentiated Janus Henderson for over 92 years.

Building on Claude, Janus Henderson is putting that approach into practice in two ways that have the potential to shape the way the asset management industry utilises AI.

First, it is developing new AI-native tools for its investment and client teams:

PRISM is a global client intelligence and engagement platform for Janus Henderson’s distribution teams. Powered by Claude, it helps client-facing teams prioritise the right outreach, draw on internal and third-party data to understand what clients hold and need, and prepare personalised client communications, bringing a single, consistent tool to sales and marketing teams across regions.

LIBROS is an AI-native research management tool for Janus Henderson’s investment teams. Powered by Claude, it synthesizes the firm’s internal research alongside external research and public market data, helping analysts and portfolio managers surface relevant signals faster and spend more of their time on judgment and investment decisions.

Second, Janus Henderson is deploying Claude broadly across the firm, with Claude Code for its engineering teams and Cowork for employees across investment, distribution, and corporate functions, bringing AI further into everyday work.

PRISM and LIBROS are being built in collaboration with Janus Henderson’s technology teams and Percepta. Percepta helps large enterprises transform with AI by embedding AI engineers, researchers, and product managers directly inside an organisation and leveraging the Percepta Mosaic platform to rapidly deliver agentic workflows and custom decision-making tools.

At Janus Henderson, Percepta’s teams work alongside the firm’s investment, distribution, and technology staff to build PRISM and LIBROS on Claude and to construct the data and knowledge foundation that connects Claude to Janus Henderson’s proprietary research, client, and market data.

That embedded model addresses a problem that has slowed AI adoption across asset management: generic tools rarely fit how an active manager researches markets, manages portfolios, and serves clients. The value comes from connecting frontier AI to a firm’s own data and rebuilding core workflows around it, which generally takes engineering built into the business, not software bought off a shelf.

Ali Dibadj, Chief Executive Officer of Janus Henderson, said: “We believe AI Transformation will fundamentally change the way asset managers serve their clients when it is embedded at the core of the business. This collaboration with Anthropic and Percepta builds on Janus Henderson’s partnership with Trian and General Catalyst, adds to our innovative leadership in AI and tokenisation, and supports our ambition to be the most technologically sophisticated asset manager in the world. We believe it will enhance how we deliver for our clients—the 75 million people* worldwide who rely on us to build a brighter future together.”

Peter Nolan, Head of Asset & Wealth Management at Anthropic, said: “Asset management is a knowledge-intensive industry where reliable AI can help teams work faster and serve clients better. Janus Henderson is putting Claude directly into the hands of the teams managing investments and client relationships: from purpose-built tools like PRISM and LIBROS to Claude Code and Cowork across the firm.”

Hirsh Jain, Chief Executive Officer of Percepta, added: “Transforming industries with AI requires fundamentally rethinking how work gets done in organisations and engineering systems that are purpose-built for a new mode of operations. Working with Janus Henderson, we are focused on strengthening research and market intelligence and elevating client engagement. We are proud to collaborate with Janus Henderson and Anthropic in transforming the asset management industry.”

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Ali Dibadj

Janus Henderson has announced that it has entered into an agreement to acquire Rantum Capital, a Frankfurt‑based private markets investment manager, strengthening its presence in Germany and accelerating its ambitions in private markets across Europe.

Founded in 2013, Rantum Capital focuses on providing private debt and private equity financing solutions to family and entrepreneur‑owned small and mid‑sized companies in Germany, Austria and Switzerland (the DACH region). The firm has raised around €1.2 billion of capital across its private credit and private equity strategies.

Germany is one of the largest and most important institutional investment markets in Europe. The acquisition will significantly increase Janus Henderson’s scale and local presence in the country, while Rantum’s established relationships with institutional investors, including pensions, insurers and family offices, will extend Janus Henderson’s reach across the DACH region.

Rantum is expected to play a central role in the build‑out of Janus Henderson’s pan‑European private credit platform, leveraging its 13‑year track record and highly experienced investment team. The firm’s differentiated sourcing model and established capabilities position it well to support a phased expansion across Europe over time.

The acquisition also enhances Janus Henderson’s capabilities in private equity, complementing the firm’s broader private markets strategy. Rantum’s private equity expertise has the potential to support future product development.

A distinctive element of Rantum’s platform is its industrial partner network, a group of highly experienced former board members and senior executives from leading German companies. This network provides deep sector insight, strengthens sourcing and enhances local credibility, offering additional perspective and connectivity for Janus Henderson.

The acquisition builds on Janus Henderson’s recent expansion in private markets, following the acquisitions of NBK Capital Partners in the Middle East and Victory Park Capital in the US in 2024, and the firm’s pre-IPO investment strategies, and represents a further step in developing differentiated private markets capabilities across key regions.

Ali Dibadj, Chief Executive Officer of Janus Henderson, said: “As client demand for private markets continues to grow, we are very excited to announce the acquisition of Rantum Capital, which expands our private credit and private equity capabilities in Europe, a strategically important region for the firm. This transaction reflects our focus on diversifying into high‑demand areas while also amplifying our existing strengths, including our institutional client relationships, to better support our clients’ evolving needs.”

Alex Veroude, Head of Fixed Income at Janus Henderson, said: “We are delighted to have the Rantum team join Janus Henderson. They have built a strong private markets platform with a proven track record and deep relationships in Germany and across the DACH region. As clients seek differentiated exposure to private credit, this transaction strengthens our ability to meet that demand. It builds on the private markets capabilities we have been expanding globally, including Victory Park Capital in the US and NBK Capital Partners in the Middle East, and complements our broader offering, including our securitised and ETF capabilities, allowing us to offer a wider range of credit solutions to clients.”

Dirk Notheis, Co-Founder and Managing Director of Rantum Capital, said: “We are very pleased to be joining Janus Henderson, a company with a strong culture and entrepreneurial approach. By combining our local and private markets expertise with Janus Henderson’s global distribution platform, we will be able to create even more value for our investors in the future and expand our offering across Europe”.

 Financial terms of the transaction are not disclosed and the acquisition is expected to close in the third quarter of 2026 subject to customary closing conditions, including regulatory approval.

Campbell Lutyens served as exclusive financial advisor to Rantum Capital. Schilling, Zutt & Anschütz acted as legal counsel to Rantum Capital and Skadden, Arps, Slate, Meagher & Flom acted as legal counsel to Janus Henderson.

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Nick Sheridan

Key takeaways

• Market returns have been dominated by a narrow group of large-cap stocks, increasing concentration and limiting diversification.
• As market leadership broadens in a period of greater geopolitical uncertainty, smaller companies are responding more quickly to improvements in sentiment, highlighting a shift away from the narrow dominance of mega-cap stocks.
• Global smaller companies are under-owned and under-researched, offering greater potential for bottom-up stock pickers to identify mispriced stocks and earlier-stage higher-growth opportunities.

Markets started 2026 on an uncertain footing, pulled in different directions by geopolitical instability. The conflict in the Middle East, which began at the end of February, brought energy markets back into stark focus. Blocked supplies through the Strait of Hormuz pushed oil prices higher and raised fresh concerns about inflation just as central banks were attempting to stabilise growth.

For investors, this has created a challenging mix of risks and uncertainties. Risk appetite has weakened as attention has become fixed on the conflict and its implications. Meanwhile, expectations for fiscal and monetary policies have shifted. Higher energy prices have complicated the outlook for interest rates. The uncertainty of government policy announcements via social has led to rapid swings in sentiment. The path to a lasting resolution remains obscured.

Despite this backdrop, one notable feature of recent market behaviour has been the resilience of global smaller companies. This is typically the part of the market that struggles when uncertainty is elevated and policy is restrictive. In our view, this reflects modest starting valuations, positive earnings expectations, and a gradual shift in how investors are approaching markets. But even periods of tentative improvement in sentiment have seen investors look beyond the most heavily owned areas, suggesting that attention is no longer as narrowly focused as it once was.

A turning point for market concentration

Over the past decade, market returns have been dominated by a small group of large-cap technology companies (ie. the ‘Magnificent 7’ – Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla). At the same time, higher interest rates, macro uncertainty, and a preference for liquidity has favoured larger, more resilient businesses. Combined with passive flows, this has created an increasingly concentrated market, turning investor allocations into a tacit call on technology stocks.

What appears to be changing is not a sudden reversal but a gradual broadening of leadership. The focus is shifting from owning what has worked to reassessing where future returns may come from. It has been driven by a subtle change in behaviour, with investors showing greater sensitivity to valuation, a more questioning approach to crowded trades, and growing awareness of how concentrated portfolios have become, particularly at a time of heightened geopolitical uncertainty.

The dominance of the largest companies has not disappeared, but it is no longer unquestioned. Artificial intelligence remains a powerful structural theme, yet investors are starting to look beyond the most obvious beneficiaries, to smaller companies exposed to adjacent areas of growth.

At the same time, the earnings picture for smaller companies is improving. Combined with more modest starting valuations relative to global large caps (Exhibit 1), we believe it supports the conditions for a re-rating, even in an uneven market.

Different regions, different strengths

Much like their larger counterparts, global smaller companies provide exposure to a diverse set of local economies and sector opportunities. Unlike large multinationals, however, they tend to be more closely tied to domestic or regional growth, which can be an advantage in a more fragmented geopolitical environment. They also tend to be more entrepreneurial and agile, often driving advances within specialised niches, rather than at scale.

Another defining feature is how little attention they receive. Smaller companies are typically under-owned and under-researched, with materially less coverage from stock analysts. A combination of less scrutiny and more varied outcomes creates opportunity for active investors taking a selective approach. Particularly so, given how strong earnings forecasts are for smaller companies relative to their large-cap peers[1].

But there are also important differences across regions, offering built-in diversification within the small-cap category. In the US, deep capital markets and a strong culture of innovation support a broad pipeline of companies across technology, healthcare, and specialised industrials. In Europe, the market is more weighted towards industrials, manufacturing, and niche export-led businesses. Many of these have strong technical expertise and pricing power, alongside tailwinds from defence and infrastructure spending.

Japan offers another distinct profile, characterised by high-quality industrial and technology businesses. Improving corporate governance and a greater focus on shareholder returns are helping to unlock value in companies that have historically been overlooked.

Market inefficiency equals opportunity for active investors

Global smaller companies remain one of the few areas of genuine inefficiency in equity markets. Limited analyst coverage and the diversity of the opportunity set mean there is real scope to add value through detailed research and engagement.

This increases the value of information in the small cap space, given that outcomes in smaller companies are driven more by stock-level factors than by broad market movements. Sector and stock dispersion is wide, meaning the gap between winners and losers can be significant. This makes a research-led, data-driven approach essential, with a focus on characteristics such as return on equity, balance sheet strength, and the sustainability of earnings.

For investors willing to take a longer-term view, this part of the market offers exposure to businesses earlier in their growth journey. After all, many of today’s dominant companies, such as Nvidia, began as small caps. This is not to overlook the risks; smaller companies can be more volatile and more sensitive to economic cycles. Navigating these risks requires a disciplined, structured approach to stock selection.

Overall, we believe that global smaller companies continue to offer a compelling opportunity set. In a market long dominated by a narrow group of large-cap stocks, they provide diversification, exposure to innovation, and access to domestic growth trends across regions. The macro environment remains uncertain. However, for investors focused on fundamentals, the breadth of opportunities within global smaller companies remains significant.

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Notes:
[1] Source: Bloomberg, Janus Henderson Investors, as at 9 April 2026. There is no guarantee that past trends will continue, or forecasts will be realised. Past performance does not predict future returns.

References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

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Shaon Baqui

Artificial intelligence (AI) has been the undeniable driver of global equity markets over the past few years, and the numbers associated with it  – capital expenditure, revenue growth, market capitalisations – are staggering.

Given the duration of this mega-theme and AI’s dominance over stocks, many investors are wondering whether expectations have moved ahead of reality, and whether this historic level of investment is justified. To address this question, we can use this week’s quarterly earnings report from Nvidia as a report card of sorts, as much of the AI ecosystem either directly or indirectly has its fortunes linked to the semiconductor juggernaut.

Firing on all cylinders

Based on Nvidia’s recent financial and operational performance –  and perhaps more importantly, its expectation for near- to mid-term developments – the AI supercycle is not just progressing as planned but accelerating in many somewhat unexpected ways. As intimated, the unprecedented magnitude of the report’s numbers is news in itself. More germane to investors, though, is how Nvidia’s performance illustrates the pace of AI adoption and how it is evolving.

Revenue for the quarter was roughly $82 billion, a 20% gain over the previous reporting period and up 85% from the same period in 2025. The story just beneath this headline figure was revealing with respect to AI’s evolution: Revenues were split roughly 50/50 between hyperscalers – the tech megacaps behind the historic capital expenditure (CapEx) buildout – and another category that includes the AI cloud plus industrial and enterprise users.

Even more notable is that growth attributable to hyperscalers clocked in at 12% quarter over quarter, while the cloud/industrial/enterprise segment expanded by 31%. Growth at this pace indicates demand for the fundamental building blocks of AI – graphics processing units (GPUs) – is strong.

Agents have arrived

The report also validated our view that the era of agents^[1] has arrived. Company management explicitly stated that inference has hit an inflection point. Nvidia’s early ascent was driven on the back of demand for its cutting-edge GPUs used in training AI models. The industry is now transitioning to the inference stage, which essentially means leveraging the trained models to carry out myriad tasks across the global economy. Much of that work will be done by AI agents.

Management echoed our view that AI users will create billions of agents, each tasked with executing the operational aspects of AI. Given the power of networking laws, this implies a nearly incomprehensible number of tokens – fundamental units of data processed – generated.

Also hinting at the increasing role AI will play, Nvidia announced an ambitious rollout of its first standalone central processing unit (CPU), Vera. It’s only recently understood that CPUs will be an essential element in enabling agents to schedule and execute relatively elementary computing tasks. Without CPUs, the best training and GPU-enabled “thinking” would be for naught. Management went so far as to put a $200 billion number on the AI CPU addressable market.

So much more than hyperscalers

In AI’s training stage, hyperscalers had the demand – and the cash – to ramp up this nascent ecosystem. As indicated by the 31% growth in the cloud/industrial/enterprise segment, a handoff is occurring, and these segments will be the end users of AI models, applying them to use cases across industries. Categories that we see as adopters are manufacturing, robotics, healthcare small chemicals, and physical sciences like energy. Not to be ignored is sovereign AI, as countries see it as a strategic imperative to fortify their economic and national security in the age of AI.

We view development as perhaps the most misunderstood concept in AI investing. Many investors hang on every word emanating from the hyperscalers while overlooking that there are hundreds of thousands of companies and other entities racing to integrate AI into their strategies and operations. The adoption of AI within this underappreciated – and massive – segment could exceed that of the adoption of earlier technologies given AI’s potential to improve productivity and eventually establish AI native business models.

Despite a rapidly broadening market of AI applications, frontier models and AI labs still play a major role in future advancement. Nvidia Chief Executive Jensen Huang announced deeper collaboration with model developer Anthropic to help alleviate its shortfall in compute. Furthermore, the universe of frontier models is growing, with all seeking the most advanced GPUs. As incremental – and more complex – compute capacity is deployed, one can argue that AI’s capabilities will grow, expanding its use cases and thus demand.

Another potential secular driver for the AI ecosystem is the growth of data centres whose mission will be to process as many tokens as possible and sell this service to applications providers in need of third-party compute. These AI factories, in our view, will become an increasingly large source of demand for both advanced GPUs and CPUs. These factories will be dispersed globally, with China possibly positioning itself^[2] as a dominant player in processing tokens. In this respect, Nvidia’s ability to sell at least older generations of GPUs to China is something investors will want to monitor as the geopolitical climate shifts.

Regardless of where these data centres are located, a dearth of electricity to adequately power them – at least outside of China – will invariably require their operators to seek out the most energy efficient chips to maximise their finite energy resources.

Still early innings

Mr. Huang and his management team, in our view, methodically debunked nearly every tenet of the bear case surrounding the scope of the AI investment cycle. A powerful rejoinder was management’s assessment that annual hyperscaler CapEx could reach $3 trillion to $4 trillion by 2030, compared to an estimated $1 trillion in 2027. This is a gaudy but imaginable number given agentic AI and its ability to be a force multiplier for inference. To be determined are the unknowns, namely what native AI businesses and applications emerge and what will be their incremental demand for compute.

Nvidia’s most recent earnings and outlook can be viewed as a sextant allowing one to peer over the not-too-distant horizon into the unknown world of the global AI economy. In this respect, we saw little in this week’s report to diminish our favourable view of the sector.

Yes, looking at hyperscaler CapEx spend in isolation could create anxiety in many investors. What they fail to recognise, however, is that GPUs, data centres, and now CPUs are establishing the foundation of a fundamentally transformed global economy – one in which countless end users across sectors and geographies will allocate resources to gain access, with the aim of improving their economic and societal outcomes.

By Shaon Baqui, Research Analyst 

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Notes:
[1] The agentic era broadens AI’s tailwinds
[2] JH Explorer: China in the era of AI

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Trend is your friend… if you blend…

Portfolio Managers Mark Richardson and Robert Shimell at Janus Henderson explore how trend following strategies can help investors to adapt when market leadership shifts and traditional diversification becomes less reliable.

How does trend-following work?

• Trend following is a systematic investment approach that seeks to capture sustained price movements across global financial markets. These strategies typically operate as multi asset portfolios, aligning exposure with prevailing momentum across equities, fixed income, commodities, rates, and currencies.
• Implementation is commonly achieved through futures contracts, which allow efficient access to markets, the use of leverage, and daily liquidity. Trend-following strategies aim to ‘ride’ market trends by increasing exposure to assets that are showing a directional trend, and reducing or reversing exposure during ‘trendless’ periods. They can potentially profit in both rising markets and falling markets by taking long positions in assets with upward momentum and short positions in assets with downward momentum.
• Rather than forecasting economic outcomes, trend-following relies on observable price behaviour, seeking diversification benefits and resilience across different market environments.

Trends are multi-dimensional

Trends vary not only across asset classes and geographies, but also across time horizons. Shorter‑term trends can emerge around policy surprises, positioning shifts, or abrupt changes in risk appetite. Longer‑term trends tend to reflect structural forces such as deglobalisation, energy transition dynamics, demographic change, or sustained cycles of technological investment.

Good trend-following strategies think deeply about how to allocate. A strategy that incorporates multiple time horizons, with the ability to take both long and short positions, may be better positioned to navigate both transient shocks and longer‑lasting regime shifts in an increasingly fragmented world.

In practice:

• During rising markets, trend signals may increase exposure to risk assets, while reinforcing themes through cyclical commodities or pro‑growth currencies.
• During falling or trendless markets, exposure can be reduced, shorted, or redirected towards assets perceived as more defensive, such as the US dollar, Treasuries or gold.

In this way, dynamic trend-following strategies offer a disciplined framework for navigating uncertainty without relying on static assumptions or forecasts, with the potential to generate performance in both up markets and down.

Three key benefits of a trend-following strategy:

1. Adaptability, diversification, and potential downside resilience: By responding to observable price behaviour, trend‑following can participate in sustained market rallies while reducing or reversing exposure during prolonged declines.
2. Differentiated drivers of performance: Because the opportunity set spans multiple asset classes, returns are driven by the presence of trends rather than the performance of any single market. This has historically resulted in low correlation to both equities and bonds, particularly during periods of market stress.
3. Asymmetric return profile: Trend strategies typically seek to limit losses when trends reverse while allowing gains to compound during extended moves, contrasting with the negatively skewed return profile often associated with equities.

Trend is your friend… if you blend

Today’s markets are characterised by higher volatility, unstable inflationary pressures, persistently higher interest rates and increased geopolitical risk. These conditions have challenged the diversification benefits between equities and bonds that have underpinned portfolio construction since the latter part of the 20th Century. As correlations shift and macro regimes change, static allocations may struggle to deliver the balance of growth and defensive characteristics that investors expect.

In practice, trend‑following can help address some of the structural limitations of traditional multi‑asset portfolios, such as the widely used 60/40 equity-bond allocation.

History indicates that trend-following strategies can deliver what is often referred to as ‘crisis alpha’. During episodes such as the Dot‑Com collapse of 2000–2002 and the onset of the Global Financial Crisis in 2008, these strategies demonstrated notable resilience in periods of heightened market stress (Exhibit 3).

Following trends, not narratives

The market surprises of recent years have highlighted the limitations of portfolios anchored to a single narrative or static allocation. As markets move through 2026 and beyond, leadership can shift quickly – not only within equities, but across asset classes and regions. This is an area with huge potential to grow, where many investors are arguably underinvested, given that this segment of the market is a fraction of the market cap of single stocks like Apple or NVIDIA.

Liquid, systematic trend‑following strategies, operating across assets and within a long/short framework, offer a way to respond to these evolving conditions. Rather than relying on consensus forecasts or fixed assumptions, they seek to align exposure with prevailing market momentum across equities, bonds, rates, commodities, and currencies – keeping investors participating in a trend for as long as it runs and removing the human biases that can influence positioning.

Crucially, trends are not confined to rising markets. They can emerge during periods of stress, transition, or consolidation, and across multiple time horizons. For investors seeking greater resilience in an uncertain world, a trend-following strategy offers the ability to adapt systematically as conditions change –– a very valuable attribute for any portfolio to have.

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Emma Lawson

Market review

A hiking Reserve Bank of Australia (RBA), balanced against a global risk off environment, resulted in the Australian bond market, as measured by the Bloomberg AusBond Composite 0+ Yr Index, rising 0.88%.

The RBA kick started the hiking cycle in February, increasing the cash rate 25 basis points (bps) to 3.85%. Three‑month Bank Bill Swap Rates (BBSW) rose 15bps to 3.99% and six‑month BBSW 24bps to 4.33%. The three‑year government bond yield eased 5bps to 4.22% and ten‑year yields declined 16bps to 4.65%, resulting in a flatter domestic yield curve.

The global environment outweighed the RBA’s hawkishness as a myriad of intersecting concerns materialised. Broad questions are being asked of the implications of artificial intelligence (AI) for a range of economic sectors and broad labour markets. This has also led to questions relating to credit markets, private credit and software profitability. Time will tell with these themes, but it weighed on sentiment and generated uncertainty. Global economic activity was generally stable, with market focus elsewhere.

Australia isn’t immune from these themes, but the local dataflow has been more instrumental. Headline CPI rose 3.8%, unchanged from the prior month, while trimmed mean CPI was 3.4%, up from 3.3%. This was higher than expected, and increases were broader based than in prior months. The RBA are concerned about the persistence of inflation, so this was an unwelcome outcome. Labour market conditions remained firm, with the unemployment rate at 4.1% in January, with supportive inputs. The NAB Business Survey showed business conditions moderating slightly. Consumer sentiment weakened following the RBA move, with the Westpac–Melbourne Institute Consumer Sentiment Index falling to 90.5 in February from 92.9 in January, household spending was also weaker in the month.

Under these conditions, the RBA remain highly data dependent, and the advent of Middle East tensions at month end are likely to increase policy path uncertainty. The domestic economy shows signs of general resilience, but the global backdrop has the potential for disruption.

Market outlook

We see the RBA continuing to raise interest rates, to above what the market currently anticipates over the life of the current cycle. Our high case is one where inflation remains elevated and the RBA are forced to raise interest rates more than expected into 2027. Our low case reflects a weaker economic outcome, if global uncertainties are renewed and the labour market deteriorates. We hold no tilt at present. We hold a small long duration position, targeted on the curve, and remain vigilant to take advantage of market mispricing.

Monthly focus – AI productivity in the Australian context

Australia has always embraced general purpose technology (GPT) and adapted it to suit our unique economy. The AI transformation is expected to be no different. Using the Organisation for Economic Co-operation and Development (OECD) study of productivity gains from AI as a guide, we assume that AI will raise productivity levels in the Australian economy over the coming decade, as technology augments employees across the sectors Australia has a comparative advantage in. Rising productivity, given it is a significant input, leads to a higher neutral interest rate in the medium term.

The OECD examined the productivity benefits of AI^[1] across the G7 economies. Their process applied a number of increasingly common methodologies studying this topic and pulled them together. First, they note the impact on specific tasks, then the exposure of tasks in industry sectors, finally the rate of adoption for the economy. If we put this in an Australian context, the industries in which AI is likely to augment work feature highly in the economy^[2]. Jobs and Skills Australia note that only 4% of the workforce have full automation exposure, while 96% have medium to high AI augmentation, where AI can be used to support and enhance worker output.

AI augmentation is expected to be high in significant industry sectors of the Australian economy. Knowledge based services are heavily positively impacted, such as the IT sectors, finance, professionals and telecoms. Less impacted are agriculture, mining and construction. Although, there are examples of increasing use in these sectors as well. This also raises the point that there are use cases and new roles that we haven’t even envisioned as yet. Australia’s GDP is weighted toward the knowledge-based activities, except for mining. If we cross reference the OECD’s top 25% of industries benefiting from AI, Australia’s production in these sectors accounts for around 34% of GDP. Given this, we can assume that the benefits from AI enhancing productivity comes at the upper end of estimates.

The final part of the productivity puzzle is when can we expect the benefits to flow through. Australia has an interesting history when it comes to adapting to new technology. We often hear that the AI benefits for the Australia economy are “years” away, thus assuming we are a slow adopter of new technology and benefit less from the creation of new technology. However, Fleming et al^[3] note in a pre-AI study, that Australia tends to adapt new technology to suit the local specialisations and adopt new technology fully in time. Australia imports new patents in broad industries and then specialises in what Australia does well. This seems like an appropriate template for AI adoption. We might not create the underlying technology, but are likely to embrace it, and in specialised, comparative advantage sectors, embrace and enhance its use. As the 2025 Nobel prize for economics theory would suggest, it isn’t just the innovation itself but the willingness to use these in practical applications which drives sustained economic growth^[4].

Given this, we would assume, in the OECD phraseology and methodology, that Australia is most likely to follow a more medium pace of adoption. This assumes that firms follow an s-shaped profile, raising their adoption of AI technology to around 50% of firms by 2034. Their 10-year horizon started in 2022, on the official start of the technology and uses the latest digital technology adoption as a guideline. The build up tends to be a slow rise, with a more rapid profile from 2030 onwards. This is, of course, highly uncertain and many assumptions underpin the academic research.

In turn, given the exposure to AI tasks and assumed adoption rate, the OECD estimates applied to the Australian environment would suggest an additional 0.5 – 0.8 percentage point (ppt) increase in annual labour productivity. This is above the estimates from the Australian Productivity Commission (0.4ppts), and below the OECD estimates for the United States. We would assume large uncertainty bands around the assumption.

By Emma Lawson, Fixed Interest Strategist

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Views as at 2 March 2026.
Notes:
[1] Macroeconomic productivity gains from Artificial Intelligence in G7 economies”, OECD publishing, OECD Artificial Intelligence papers, June 2025, No. 41.
[2] Jobs and Skills Australia – our Gen AI Transition, Implications for Work and Skills, 14 August 2025.
[3] Fleming, Liu, Merrett and Ville, “Australian innovative activity and international technology 1854-2016, European Review of Economic History, 2024
[4] https://www.nobelprize.org/prizes/economic-sciences/2025/popular-information/

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Emma Lawson

Market review

Australian bond markets saw further repricing of the Reserve Bank of Australia (RBA) in October. The Australian bond market, as measured by the Bloomberg AusBond Composite 0+ Yr Index, rose 0.4%. The RBA maintained the cash rate at 3.60% at end September, as was expected. Three-month bank bills rose 6 basis points (bps) to 3.64% by month end. Six-month bank bill yields rose 13bps to 3.88%. Australia’s three-year government bond yields ended the month 6bps higher, at 3.60%, while 10-year government bond yields were unchanged at 4.31%.

The Australian economy is handing the baton of economic growth from the public sector to the private sector. There are inevitably conflicting economic signals through this process as the transition is unlikely to be perfectly timed. Amidst it all, inflation is rising, while the labour market softens. As this occurs, it is more likely that the markets vacillate on the expected interest rate profile. This was evidenced as views on the RBA went full circle in the month. RBA Governor Bullock was hawkish at their early October meeting, with a renewed focus on inflation risks and downplaying labour market softness. Post weak consumer confidence, soft job advertisements and most importantly a rise in the unemployment rate to 4.5%, easing pricing was partially returned. There was a further reversal post a significantly stronger inflation print than expected late in the month. Australian third quarter CPI rose to its highest level in over a year, to 3.2%yoy, and the trimmed mean rose to 3.0%yoy. These were both higher than the RBA had forecast, and lowered the probability of further easing until inflation proves less worrisome.

The dichotomy of rising inflation and slowing employment is not constrained to Australia alone. This theme is being felt in a number of advanced economies, including the United States. The US Federal Reserve lowered interest rates in October, as expected, due to weakening employment, but they warned on rising inflation. The US outlook is less clear, in part due to the ongoing government shutdowns, which mean there is no government economic data releases.

Market outlook

With inflation higher than the RBA are comfortable, markets priced out much of the last phase of the easing cycle. There is one more easing priced in through 2026. We pushed out our expected base case for easing to H1 2026, reducing it to two more cuts to 3.10%. This leaves policy above our estimate of neutral. Our low case reflects a weaker economic outcome and the RBA easing by a total of 250bps. We allocate a modest weight to the low case. We hold a relatively neutral duration position, while we remain vigilant through the volatility to take advantage of two-way mispricing.

Monthly focus – Intertwining of long-term themes

The world is awash with a number of big economic themes. These global themes, whose impacts on economies will be fully felt over years, not just months, are however, playing out in the current economic data and shaping financial market expectations. Inevitably, the inherent conflicting influences generate volatility in data and financial markets. This makes forecasting more complicated, but it also creates opportunities. We take a brief run through a number of the key themes currently in play.

This month the focus was on the boom in artificial intelligence (AI), and how this is going to shape economies, as well as investments. The economic benefits of profound technological change tend to take years to develop in full. There are question marks about the rapidity of AI adoption, and the fact that it may be faster than prior technological change periods. If true, higher productivity and potentially lower employment may come faster. Capital expenditure necessarily also needs to rise, and this impact is currently in play in some countries.

The economic impacts of climate change, both the transition to a less carbonised world, as well as warming itself, continues. We wrote about this last year. The capital required to facilitate the transition is now competing with, and in some instances, complimenting the energy needs of the AI transformation. We can expect higher capital expenditure and higher inflation from this theme.

Recent months have highlighted the deglobalisation theme, in the guise of trade disruptions. Less global geo-political co-operation is more likely to result in sub-optimal economic outcomes. Higher tariffs and trade barriers have historically led to lower economic growth and higher inflation. This can take time to flow through, and the present cycle does appear to be slow to show up, but it is having an impact. China’s international trade is rotating away from the US and US inflation experiencing higher tradeables inflation are just some examples. We should expect these themes to continue through the coming year.

Fiscal policy and high levels of government debt in some major economies is also having a strong influence on markets. Many governments did not take steps to reduce net government debt post the global financial crisis (GFC). This has led to less sustainable debt levels post the pandemic. Penalties are being extracted in the economies with high levels of both government debt and poor external balances. The existence of so-called twin deficits has seen higher bond yields. Japan, the United Kingdom and France are some examples. This theme is likely to remain, and potentially worsen, until such time as deficits are addressed. Australia is comparatively well positioned, but slippage would be unwelcome.

A related theme is fiscal dominance, where the existence of significant government debt levels influences sub-optimal policy in other spheres, such as monetary policy. Setting monetary policy in such a way as to address debt levels, explicitly or implicitly, rather than inflation targeting, has consequences. This theme has become a topic of conversation amongst economists as a possibility, rather than being evident at present. In a World where sub-optimal policy can no longer be dismissed, markets are attuned to any possibility of fiscal dominance.

Economic inequality is a further trend driving economic outcomes and creating uncertainty. This is being referenced as the “K” economy and explains some of the outcomes in the US where it can be applied to the AI economy versus the rest of the economy. In Australia, speak to any cohort with a build-up in assets and they are doing well. Wealth is rising and confidence is higher. Contrast this with cohorts without a build-up in assets, and the feeling isn’t necessarily mutual. There is uncertainty over employment, concerns over the high cost of living and poor housing affordability. This is borne out by a rise in the Gini co-efficient in Australia post the GFC, but also more pronounced in countries such as the US. Rising inequality has the power to influence geopolitical outcomes, but also create anomalies such as low consumer confidence and stronger consumer spending.

Demographics, including ageing and migration, are also influencing current economic outcomes, and will be doing so for decades to come. The rapid migration cycle through and post the pandemic continues to influence economic growth, and labour markets, in a number of economies. Population growth is expected to modestly ease further in Australia, where it has already reduced monthly labour replacement needs. This weighs on supply, but also demand. Alongside this, overall ageing demographics alter savings demand and supply, as well as labour supply and demand.

Through these crosscurrents we find it is best to track what underlying fundamentals and historical precedent advise us about how economies behave. Anomalies will come, and go, deciphering the news from the distraction is key.

By Emma Lawson, Fixed Interest Strategist – Macroeconomics in the Janus Henderson Australian Fixed Interest team

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Nick Sheridan

Janus Henderson Investors has announced the Australian launch of the Janus Henderson Global Smaller Companies Fund.

The newly launched fund aims to provide Australian investors with access to potential growth opportunities by investing in smaller companies across the globe.

It contains an exposure to Australian small cap companies of 5.4%, which is higher than the benchmark MSCI World Small Cap Index at 3.8% (as at 30 September 2025). It includes Australian companies such as JB Hi-Fi which Janus Henderson Investors assesses as potentially offering above average returns compared to other small caps around the globe.

The fund is designed to capitalise on the advantages of investing in smaller companies, which often exhibit higher growth rates and greater corporate agility compared to larger counterparts. The fund will be managed by Nick Sheridan, a seasoned portfolio manager with over 30 years of experience in funds management.

Commenting on the launch, Sheridan said: “Investing in global small-cap companies can offer several advantages for investors, including diversification benefits due to the wide selection across various industries and sectors and the potential for significant growth opportunities. We look for good quality but potentially undervalued companies and believe that the current market environment presents a compelling opportunity for investors to gain exposure to this dynamic segment.”

The Janus Henderson Global Smaller Companies Fund will be available to both retail and institutional investors in Australia. The fund defines smaller companies as those with market capitalisation within the range of companies included in the MSCI World Small Cap Index. It can invest in any industry, in any country within the Index.

Matt Gaden, Head of Australia at Janus Henderson Investors, expressed his enthusiasm for the new fund: “Janus Henderson Investors is committed to creating and developing innovative strategies to better service its clients. We see real opportunities to bring our best investment talent in global equities to the Australian market. The launch of the Global Smaller Companies Fund is a testament to our dedication to providing Australian investors with access to high-quality, actively managed investment solutions to achieve their financial goals.”

This latest launch further enhances Janus Henderson’s existing suite of investment offerings available to Australian investors, including the Janus Henderson Global Research Fund and the Janus Henderson Global Sustainable Equity Fund, reinforcing the firm’s commitment to delivering a diverse range of products tailored to local market needs.

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Divyaunsh Divatia

Janus Henderson Research Analyst Divyaunsh Divatia explores the growth in chatbot use for routine search queries and how the trend might impact search functions – and revenues.

For years, Google has dominated Internet-based search and has been able to convert those queries into substantial revenues for parent company, Alphabet. Today, doubts are growing about whether that dominance can stand up to AI search and chatbots, which are quickly building scale and ushering in new forms of consumer behaviour.

Indeed, ChatGPT – the large language model that made a splash in late 2022 with its user-friendly interface – is on track to potentially run away with the chatbot market, much as Google did with search in the early 2000s. Its creator, OpenAI, reports ChatGPT is set to hit 700 million weekly active users this month and says that number could reach one billion by the end of the year.

By comparison, Google’s equivalent chatbot, Gemini, currently has 450 million monthly active users, according to the company, and on a daily basis, Gemini users average four queries per day, versus 7.5 for ChatGPT.

Given that AI chatbots are extremely adept at keeping consumers’ attention, with highly personalised responses and follow-up questions, the implications for all Internet platforms could be significant. Google Search is no exception.

Investor takeaways

For investors, the biggest question now is whether ChatGPT eventually usurps Google Search as the predominant way consumers seek out information. In 2024, Google Search generated just over $198 billion in revenue, or 57% of Alphabet’s total revenue. Google still attracts huge volumes of traffic – roughly 14 billion daily queries versus 2.5 billion prompts on ChatGPT.

However, those searches are increasingly being directed to the AI overviews that now appear at the top of every query result, as well as Google’s AI Mode, which recently launched in the US, India, and the UK and now has more than 100 million monthly average users.

This shift threatens to shake up the legacy search model, as well as the open web, which depends on traffic from Google Search. Already, traffic to sites providing news, product reviews, vacation guides and health tips is down significantly since Google launched AI Overviews.

In fact, there is a growing theory that we could soon enter a “zero-click” world, where users search and buy almost instantly, à la Amazon transactions today. And in the not-too-distant future, AI chatbots might be able to “agentise” many of workflows, such as researching and booking travel.

In short, we think the stakes could not be higher for legacy search, and that companies will need to adjust to a potentially zero-click reality.

Already, we are seeing the emergence of software startups that promise to optimise brand positioning in AI overviews by analysing how chatbots respond to text prompts and rank brands in their responses.

If there’s a silver lining for legacy players, it may be that better search outcomes could yield higher-value interactions with consumers. Publishers such as Google have reported higher-quality clicks, as users spend more time on sites with greater relevance to their queries. That could enable companies to charge advertisers more per click.

Still, we wouldn’t take for granted that past growth rates of Internet search, and the corresponding ad revenues, will continue in the near term. We think investors should brace for change and seek out companies doing the same.

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Hamish Chamberlayne

Janus Henderson Investors Portfolio Manager Hamish Chamberlayne explores how, in a world marked by geopolitical upheaval, artificial intelligence (AI) is transforming traditional economic forces, presenting both opportunities and challenges.

In today’s world, characterised by heightened confusion and unpredictability, geopolitical dynamics are increasingly overshadowing traditional economic forces. Nations worldwide grapple with declining workforce participation, ageing demographics, unproductive government expenditure, and substantial fiscal deficits. Yet, within this turbulent landscape the secular drivers of sustainable investing remain intact.

Secular investment trends around electrification, renewable energy, digitalisation, AI and reshoring are progressing uninterrupted

Last year, investment in the green transition reached unprecedented levels, surpassing US$2 trillion for the first time. The majority of this funding was directed towards established technologies such as renewable energy, energy storage solutions, smart grids and electric vehicles (EVs).

Despite the recent stagnation of US climate initiatives, Europe and China are intensifying their clean energy and broader sustainability efforts. Global EV sales this year are forecast to grow by 25% (22 million) compared to 2024, with China accounting for almost two thirds, followed by Europe (17%). Even in the US, EV sales are set to grow by 7% this year despite the Trump administration’s withdrawal of federal support.

Meanwhile, President Trump’s ‘Big Beautiful Bill’ will provide significant government funding, grants and tax incentives for companies investing in the US. Reshoring manufacturing and developing supply chain resilience in critical minerals are set to underpin a prolonged investment cycle, which is further fuelled by the gigantic levels of investment going towards AI infrastructure.

The large tech companies dubbed the ‘Magnificent 7’ are spending in excess of half a trillion dollars annually in the race for AI supremacy. All of this investment is resource and labour intensive and we see sustained growth in demand for power and electrification infrastructure to support it.

The role of AI in decarbonisation

These high levels of investment provoke questions about environmental sustainability.

The build out of all this AI and electrification infrastructure is also carbon intensive and we are paying close attention to the fact that carbon emissions are not going in the right direction. Although we are concerned by this uptick in emissions, we are optimistic that AI will ultimately play a beneficial role in decarbonisation efforts through advancements in innovation and productivity; and we remain confident that the growing demand for energy will be met with increased investments in clean energy solutions.

We are maintaining close engagement dialogue with our investee companies regarding their decarbonisation pathways. Thus far, we are pleased to report that we have seen no evidence from the companies we invest in that their corporate sustainability initiatives are slowing.

In fact, we see that companies worldwide keep setting net-zero targets and pouring capital into efficiency, waste reduction and supply-chain resiliency, providing durable foundations for our sustainable investment themes.

Running hot – a fiery economy ahead?

Coincident with these high levels of investment, government deficits are expected to remain large, and this is supportive of corporate profitability and asset prices. When combined with easing monetary policy, and pro-growth changes to banking regulation, we believe this is a positive backdrop for global equity markets.

Therefore, despite geopolitical uncertainties, we believe the stage is set for the global economy to run hot, and investors should be concentrating on these clear and significant investment trends which are marching ahead regardless.

These trends are inherently long-term and driven by technological advancements and societal needs rather than political shifts or individual country policies.

Sustainable fundamentals

Our team continues to concentrate on companies positioned to benefit from these enduring sustainability trends. For example, we favour sectors such as industrials and information technology – areas replete with innovators solving efficiency and climate challenges.

Companies within electrical equipment, professional services, software, renewables, automotive technology and infrastructure are exposed to the secular themes of electrification, digital services, AI and decarbonisation.

These companies are capitalising on booming demand and are exactly the kind of “picks-and-shovels” providers enabling this digital, electric and green future that the world is transitioning towards.

We believe it is important to seek out high-quality businesses with strong free cash flow and durable growth. This discipline tempers volatility during market shocks. It echoes lessons from 2020, when companies with robust financials and sustainable moats (competitive advantage that helps protect a company’s profitability) proved far more resilient.

By “staying on the right side of disruption” – i.e. investing in firms driving change rather than those at risk from it – we believe investors can better weather turbulence and capture superior growth over time.

This means being incessantly forward-looking in approach. Our thesis is grounded in the principles of durability allied with innovation – as Peter Drucker, the Austrian American author and consultant who helped develop modern management theory, reminds us: “The greatest danger in times of turbulence, is not the turbulence, it’s acting with yesterday’s logic.”

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