Martin Conlon

Strong company earnings may be masking a less sustainable economic backdrop according to Schroders’ Australian equities team.

Despite Australian companies delivering a broadly positive reporting season, investors should be cautious, says Schroders Head of Australian Equities, Martin Conlon, who believes the disconnect between equity markets and bond markets was becoming increasingly important for investors.

“Results were broadly positive, but investors need to understand why the operating environment is so supportive at the moment,” said Conlon.

“The government is spending a lot more than they collect in taxes, there’s still relatively strong credit growth in the private sector, and you’ve also got a lot of spending by the hyperscalers. All of that is building up to an inflationary environment. But it also means that lots of companies have plenty of revenue growth. Where they do have pricing power, they’re generally exercising it, which means the results are pretty good for those companies benefiting from strong pricing environments.

“The question for investors is whether those conditions are sustainable. We think they are currently better than normal, and the bond market is increasingly telling the equity market that those conditions will need to be constrained.”

AI: an inflationary force before it becomes deflationary

Artificial intelligence is emerging as a significant force across the real economy, but investors should not yet assume that promised productivity gains will automatically translate into higher earnings for traditional businesses, says Equities Analyst Jennifer Odjugo.

“Every company has an anecdote about making gains from AI. The challenge is finding those gains in the earnings, and that has been difficult to see so far,” said Odjugo.

“Block and WiseTech are two interesting examples. Both have attributed significant workforce reductions to AI, but when you look more closely at the businesses, there are also clear signs of broader right-sizing. So it is difficult to say that AI productivity gains are yet flowing through clearly to earnings.”

Instead, AI investment is creating significant demand for hardware, computing power, electricity and construction, with the potential to crowd out other areas of the economy.

“We’re already seeing that in hardware. Apple has increased prices across several of its products, while memory chips and other hardware are also experiencing significant price increases. So far, the more obvious impact of AI is inflationary rather than deflationary.”

Copper enthusiasm runs ahead of fundamentals

Schroders Head of Research, Justin Halliwell, said the market’s enthusiasm for copper has pushed valuations of major miners to levels that are difficult to justify on fundamental assumptions.

“BHP has become the largest stock in the Australian market, with its market cap increasing substantially this year as investors have embraced its copper exposure.

“The market cap of BHP has increased by around $110 billion this year, while Fortescue has gone backwards, which tells you how much investors have rewarded the copper narrative.”

However, Halliwell said investors should distinguish between the attractive long-term demand outlook for copper and the price already being reflected in copper equities.

“Copper has a positive long-term backdrop, particularly from electrification and data centres, but the price has become very elevated,” said Halliwell.

“Data centres are an important source of incremental demand, but they are still a relatively small part of a 30-million-tonne global copper market. At much higher copper prices, the other 99 per cent of demand becomes increasingly price-sensitive.”

Halliwell said the team remained cautious on copper stocks because valuations were already discounting an extremely strong long-term copper price.

“We’re not buying copper, we’re buying copper equities, so what matters is what is already being priced into those equities,” he said.

The team sees a more compelling relative opportunity in Rio Tinto, given its combination of copper, aluminium and lithium exposure, with aluminium potentially benefiting from the increasing competition for electricity created by data centres and broader electrification.

Gold equities: momentum has moved ahead of the fundamentals

The team remains cautious about the sharp rally in Australian gold equities, with Odjugo noting that gold stocks have significantly outperformed the underlying gold price.

While central-bank buying and concerns around the US dollar have supported the gold price, Odjugo said the disconnect between gold equities and the underlying commodity had become increasingly pronounced.

“Gold equities are currently riding beyond where the gold price is, and that is partly being driven by where multiples are,” she said.

“Our concern is that there is a significant amount of momentum in the sector, and the relationship between gold prices and bond yields has become dislocated.

“We think that relationship could ultimately normalise, which means investors need to be careful about making decisions based on recent gold equity performance.”

Housing and credit: the windscreen matters more than the rear-view mirror

Looking ahead, Conlon said investors should pay closer attention to credit growth than headline inflation when assessing the direction of the economy.

Housing credit growth is already slowing, while changes to negative gearing and capital gains tax are placing additional pressure on the domestic housing market.

“Credit is the input and inflation is the output. If credit growth slows sustainably, there is less money coming into the system and, ultimately, less inflationary pressure.

“What’s important for investors is what the economy looks like through the windscreen, rather than what has happened through the rear-view mirror.”

The team believes this creates a more challenging outlook for sectors that have benefited from strong credit growth, particularly the banks.

Conlon said the banking sector could face greater pressure if housing conditions deteriorate further, with bad debt charges currently providing little drag on reported profits.

“If asset prices start to fall materially, you would expect bad debts to increase and profits to come under pressure,” he said.

Private credit risks remain contained – for now

The team also addressed concerns around private credit and recent stress in the Australian property and development market, arguing that the risks to listed equities and the banking system remain relatively contained provided asset prices do not experience a significant further decline.

Halliwell said the structure of private credit meant losses should, in principle, be borne by investors who had taken the associated risk rather than being transferred to bank depositors or taxpayers.

“The key issue for us is what happens to asset prices from here,” he said.

“Developers will periodically get into trouble, but creditors generally don’t lose significant amounts unless the underlying asset values fall substantially. At the moment, asset values have declined somewhat, but they haven’t collapsed.

“If that changes and the decline in asset prices gathers momentum, that is when we would become much more concerned.”

Against this backdrop, the Schroders Australian Equities team believes investors should remain focused on fundamental value rather than chasing the strongest-performing themes in the market.

Conlon said the combination of elevated valuations, potentially unsustainable economic support and growing financial market leverage meant this was not an environment for investors to become complacent.

“Valuations are pretty full, and this is not the time to be a hero in equity markets,” he said.

“We think investors need to be patient, think about earnings through the cycle and avoid financial leverage.

“The opportunities are likely to come from areas where the market is extrapolating short-term weakness too far, rather than simply following the strongest narratives in the market.”

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The appointments build on the continued growth and strong performance of Schroders’ Australian Equities business, which today manages approximately A$10.2 billion on behalf of clients, up from approximately A$8.0 billion in the last three years.

Supported by strong client demand, sustained investment performance and more than 60 years of market experience, Schroders Australian Equities remains one of Australia’s largest and most successful active domestic equities franchises.

Aaron Binsted will join Schroders in early November 2026 as a Portfolio Manager and Analyst. Aaron brings more than 25 years’ experience in Australian equities, both as an analyst and portfolio manager. For the past 15 years, he co-led Lazard’s Australian Equities strategies. Aaron will join Schroders’ Australian Equities Portfolio Construction Committee for the Schroder Australian Equity Fund alongside Martin Conlon, Andrew Fleming and Justin Haliwell, and will also have analyst responsibilities within the team.

Isaac Boorer has recently joined the team as Investment Analytics and AI Engineer. Isaac joins from Blackwattle Investment Partners, where he spent more than two years as an analyst and trader on the Australian Equities desk, following earlier trading roles at Antipodes and Fidante Partners.

Jeremy Huang will return to Schroders in January 2027 as a junior analyst in the Australian Equities team, having recently completed a summer internship with the business.

Commenting on the appointments, Martin Conlon, Head of Australian Equities at Schroders, said: “These appointments are an important investment in our Australian Equities capability. Our process has always been grounded in deep fundamental research, disciplined portfolio construction and a willingness to continually improve how we identify and assess opportunities for clients.

“Isaac, Aaron and Jeremy each bring different strengths to the team, from data and technology capability through to senior portfolio management experience and emerging research talent. Together, they strengthen the breadth and depth of the team and enhance our ability to deliver differentiated insights and strong long-term outcomes for clients.”

Alison Telfer, Chief Executive Officer of Schroders Australia and New Zealand, said: “Australian Equities has been a core part of Schroders Australia for more than 60 years. The continued growth and strong performance of the business reflects the strength of the team, the consistency of its process and the trust clients place in our active investment approach.

“At a time when some parts of the domestic market are under pressure in Australian equities, and reducing resources or stepping back, Schroders is investing. These appointments reinforce our conviction around this capability and our commitment to the Australian market and building the people, research and technology capability needed to support and deliver for our clients into the future.”

Commenting on his appointment, Aaron said: ‘I’ve always respected Schroders for its disciplined investment approach and strong client focus. I’m looking forward to working with a talented team and contributing to the firm’s continued growth.

As at the end of August 2026, the Schroder Australian Equity Fund had outperformed its benchmark by 6.5% over one year, 1.2% p.a. over five years and 1.2% p.a. since inception, net of fees.

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Kellie Wood

Investors should prepare for a more selective fixed income market over the coming quarter, as economic data increasingly takes precedence over central bank guidance and divergence between economies creates new opportunities, according to Schroders head of fixed income, Kellie Wood.

Wood says investors should be less focused on trying to predict the next global rate move and instead look for markets where the economic and policy outlooks are diverging.

“The next quarter is going to be about the data, not what central banks say they are going to do,” said Wood.

“For investors, that means being more selective about where they take duration and credit risk, rather than assuming all bond markets will move in the same direction.”

Wood believes Australian fixed income is well placed as softer inflation gives the RBA greater scope to move towards lower rates, while the US still faces a more uncertain inflation outlook.

“We continue to see a strong case for Australian bonds relative to US Treasuries. For investors, the opportunity is not simply that Australian rates could fall, but that the separation between Australia and the US creates an attractive relative-value opportunity.”

With credit spreads already tight, Wood says investors should focus on the income available from high-quality credit rather than relying on further spread compression to drive returns.

“Credit continues to offer investors attractive income, but we think security selection will become increasingly important.

“We favour high-quality Australian corporate and bank credit, where strong balance sheets and demand provide a solid foundation for returns.”

Wood says the changing market environment means investors need to think beyond whether central banks are cutting or holding rates.

“Investors have spent a long time focusing on the next central bank decision. The more important question now is where the economic data is taking us,” Wood said.

“That creates opportunities for investors who are prepared to look across markets, sectors and the yield curve rather than simply making a broad call on bonds.”

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Sebastian Mullins

The July tech sell off is a sign of crowded positioning and not a broken AI investment case, says Sebastian Mullins, head of multi asset and fixed income at Schroders.

“The speed of the sell-off reflected just how stretched positioning had become in technology stocks rather than a collapse in the underlying investment case for AI,” said Mullins.

“Markets had become heavily concentrated around a handful of AI beneficiaries. Once sentiment shifted, leveraged positions quickly unwound, amplifying the move lower.”

While semiconductor stocks and AI-linked markets fell during July, earnings season reinforced the strength of the sector, with Microsoft, Amazon and Apple posting strong results and boosting capex plans.

“When the chips were down, the hyperscalers didn’t fold,” said Mullins.

“The long-term structural growth story remains intact.”

Mullins said the macro backdrop still points to resilient growth, not recession.

“While markets have become more volatile, we’re not seeing the conditions typically associated with an economic downturn,” he said.

“Consumer spending remains healthy, earnings continue to surprise on the upside, inflation is easing and our recession indicators remain benign.”

Risks persist, including central bank policy uncertainty, higher oil prices and ongoing tensions in the Middle East, but Mullins says this is unlikely to derail the broader investment outlook.

“There are still reasons to be cautious, particularly around policy uncertainty and the eventual pace of AI investment,” he said.

“However, the recent correction has also removed some of the excesses that had built up in markets, creating a healthier backdrop for investors. Periods like this often create opportunities for long-term investors willing to look through short-term market noise.”

“Our view remains that economic growth is holding up. Inflation is gradually moderating and earnings momentum continues to improve. That combination continues to support risk assets over the medium term. While volatility is likely to persist, we believe investors should stay focused on the long-term outlook rather than reacting to short-term swings.”

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The hunt for yield and accelerating investment in artificial intelligence (AI) infrastructure will shape Australian credit markets in the second half of the year, according to Schroders.

Investment analyst James Tsaousidis says the Australian reporting season will be the catalyst for credit markets, with investors closely watching corporate issuance, forward earnings guidance and the continued expansion of AI-related infrastructure.

“We expect higher-yielding Australian credit to remain well supported over the coming months,” said Tsaousidis.

“Demand for quality yield continues to outweigh supply, and while reporting season should generate new issuance, if higher-beta supply remains limited, the favourable technical conditions that supported markets through July are likely to continue.”

Tsaousidis said the biggest theme remains the rapid growth of AI and the infrastructure supporting it.

“The extraordinary level of investment from global hyperscalers, including Amazon, Microsoft, Meta and Alphabet, is reshaping global credit markets,” he said.

“While Amazon’s recent US$25 billion bond issue tested investor demand in the US market, Australia’s AI story is only just beginning. The overwhelming demand for CDC Data Centres’ inaugural senior secured transaction demonstrates investors are increasingly looking for exposure to the infrastructure underpinning the digital economy.”

Tsaousidis said the search for yield should support subordinated financial and corporate debt.

“With Australian inflation easing and interest rate expectations remaining relatively stable, credit continues to offer attractive income opportunities,” he said.

“We remain positive on financial Tier 2 debt and selected subordinated corporate securities. That imbalance between supply and demand should continue to provide a supportive backdrop for the sector.”

This was most clear in July, when investors competed for a shrinking pool of higher-yielding bonds. Barclays’ perpetual non-call six-year AT1 bond was among the month’s strongest performers, with its credit spread tightening by as much as 40 basis points as demand outstripped supply.

Looking ahead, Schroders expects the strongest opportunities to remain in high-quality companies with resilient cash flows, while monitoring emerging pressures in Australia’s retail private credit market.

“The challenges we’re seeing across parts of private credit, such as pressure from commercial property exposures, higher borrowing costs and increased regulatory scrutiny, reinforce the value of quality, liquidity and transparency in listed credit markets,” Tsaousidis said.

“Those issues are largely confined to private markets, and we remain confident that high-quality public credit offers an attractive balance of income and resilience as investors navigate an uncertain macroeconomic environment.”

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Sebastian Mullins

Investors relying on the same defensive assets to protect their portfolios through every market downturn risk being caught out, with recent geopolitical events exposing how quickly traditional investment playbooks can become outdated, according to Schroders.

Sebastian Mullins, Head of Multi-Asset and Fixed Income at Schroders, said the long-held belief that government bonds or gold would reliably offset equity market volatility no longer reflects today’s investment environment.

“For decades, investors could rely on a relatively stable relationship between growth assets and traditional defensive assets,” said Mullins.

“That world has changed. Persistent inflation, geopolitical conflict and supply-side shocks have created a market where the assets that protected portfolios in one crisis may fail in the next.”

Mullins said investors have experienced first-hand how different crises produce very different market outcomes.

“During the market uncertainty of 2025, gold and international assets performed well as investors moved away from the US. Yet when conflict escalated in the Middle East this year, the market response was almost the opposite. The US dollar strengthened, capital flowed back into US assets and gold failed to provide the protection many investors expected.

“The lesson isn’t that gold no longer has a role. It’s that investors need to understand what is driving each market event rather than assuming the same assets will always behave the same way.

“The same principle applies to fixed income. There is still an important role for government bonds, but investors can no longer assume they’ll always offset equity market weakness.

“Active management matters far more in today’s environment than it did during the era of ultra-low inflation and near-zero interest rates.”

Mullins said investors should broaden their definition of diversification beyond the traditional mix of shares and bonds.

“Modern portfolio construction isn’t about finding one perfect hedge. It’s about building a range of exposures that respond differently depending on what’s driving markets.

“That may include commodities during supply shocks, currencies during geopolitical events, or alternative assets that have genuinely different return drivers.”

He said Schroders’ own investment decisions over the past year reflect this shift.

“As geopolitical tensions and supply-chain risks intensified, we reduced exposure to assets that had traditionally been viewed as defensive and increased exposure to broader commodities that we believed were better positioned for an inflationary supply shock,” he said.

“As conditions evolved, we shifted again. Effective risk management today is about adapting to changing market conditions, not relying on a static portfolio.

“Looking ahead, inflation cycles, geopolitical fragmentation and supply disruptions are likely to remain defining features of markets.

“The investors who navigate this environment most successfully won’t necessarily be those who pick the best-performing asset class. They’ll be those prepared to continually reassess how they protect their portfolios,” he added.

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Helen Mason

A looming supply squeeze in Australian financial subordinated debt is creating a compelling market opportunity, according to Schroders’ Head of Credit, Helen Mason, with billions of dollars of securities being removed from the market in the past month as investor demand remains strong.

A$5.4 billion of Additional Tier 1 (AT1) and Tier 2 securities were called in June alone, while more than A$10 billion of financial subordinated debt is scheduled to be called before December.

At the same time, new issuance from Australia’s major banks is expected to slow over the remainder of 2026, creating a growing reinvestment challenge for investors and a potentially supportive backdrop for valuations.

Mason said the imbalance between shrinking supply and persistent demand had created a particularly strong environment for financial subordinated debt.

“The technical setup for financial sub-debt remains among the most compelling we have seen in some time,” Mason said.

“We are seeing several factors happening. Major bank issuance is slowing, billions of dollars of existing securities are being called, and investor demand remains persistent.

“More than A$10 billion of financial sub-debt is scheduled to be called before December, which is expected to further reduce available supply into year-end. For investors looking to reinvest that capital, the challenge is going to be finding sufficient supply”, she said.

The supply imbalance comes as Australia’s broader corporate credit market continues to attract significant investor demand despite geopolitical and macroeconomic uncertainty.

Corporate bond issuance is already close to setting an annual record with half the year remaining, driven in part by record issuance from offshore “Kangaroo” borrowers.

A recent A$1 billion wholesale hybrid transaction from CDC Data Centres was almost six times oversubscribed. And Volkswagen (VW) priced a A$250 million senior unsecured Kangaroo bond, adding to already substantial outstanding issuance of over A$3 billion in the domestic market.

Mason said the pace of issuance was a strong signal of the depth and resilience of the Australian credit market.

“Against a backdrop of significant geopolitical and macro uncertainty, the Australian credit market continues to print deals at a remarkable pace,” she said.

“Yields remain high, performance has been solid and credit quality is exceptional. The level of demand for quality investment-grade issuers at the right price remains very strong.”

Looking ahead, Mason expects primary market supply to slow over the coming months as offshore issuers retreat during the Northern Hemisphere summer, and Australian corporates and financial institutions enter pre-results blackout periods ahead of the August reporting season.

“Reduced net supply into a market with persistent reinvestment demand should provide a constructive backdrop for credit spread performance through the quarter,” said Mason.

“While macroeconomic data is beginning to show tentative signs of softening, we do not expect material credit stress to emerge across the investment-grade universe in the near term.

“The Australian corporate credit market’s skew towards defensive infrastructure and utility issuers should also help insulate investors from some of the broader macroeconomic risks.”

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The ratings upgrade comes at a pivotal time for Australian income investors after the Australian Prudential Regulation Authority’s (APRA) decision to phase out Additional Tier 1 (AT1) bank hybrids, prompting many investors to reconsider how they generate reliable income from their portfolios.

In its latest reports, Zenith said its conviction in both Schroders strategies had strengthened, describing them as “highly attractive” options in the Australian corporate debt sector.

Further, the strategies benefit from Schroders’ well-defined top-down investment framework, complemented by rigorous bottom-up security selection, enabling the team to identify opportunities across investment-grade corporate credit while actively managing portfolio risk.

Zenith: “With a long-term track record of managing domestic credit portfolios, Zenith considers the Fund to be a highly attractive option in the corporate debt sector and our conviction has strengthened, highlighting Schroders’ well-defined top-down processes and proven ability to manage portfolios through different phases of the cycle.

“In Zenith’s opinion, the top-down framework effectively combines a range of macro inputs with the team’s qualitative insights on the idiosyncrasies of the Australian credit market.”

The ratings reflect Schroders’ long-term track record in domestic credit investing and ability to actively manage portfolios through different phases of the credit cycle.

Zenith also highlighted the strength of Schroders’ portfolio construction process and investment team, identifying Head of Credit Helen Mason’s ability to actively manage portfolios through different phases of the credit cycle as a key competitive advantage.

Mason said the upgraded ratings reflected the team’s consistent investment approach and came at an important time for Australian investors.

“We’re delighted that Zenith has strengthened its conviction in both our wholesale fund and Active ETF. The upgrade reflects the depth of our investment process, the strength of our credit research and our disciplined approach to navigating changing market conditions.

“From an investor perspective, the phase-out of bank hybrids is reshaping Australia’s income investing landscape. Investors who have traditionally relied on hybrids are now looking for high-quality alternatives that can continue to deliver attractive income while managing risk.

“We believe actively managed investment-grade credit is well placed to meet that need through diversified exposure across corporate issuers and active portfolio management,” she added.

The upgraded ratings apply to:

• Schroder Australian High Yielding Credit Fund (Wholesale Class) (APIR: SCH0778AU)
• Schroder Australian High Yielding Credit Fund – Active ETF (Cboe: HIGH)

Both strategies seek to outperform the RBA Cash Rate by 2.5 per cent to 3.0 per cent, per annum (before fees) over rolling three-year periods while providing regular monthly income through investment in predominantly Australian investment-grade corporate credit.

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Claire Smith

For most investors, Australian direct property has always looked like a safe and grown-up choice – tangible, local, familiar. In comparison, global private real estate has often looked like the exotic alternative. But Claire Smith, head of investment directors, public and private markets at Schroders, says the facts increasingly point the other way.

The familiar Australian residential trade is more exposed to changing tax policy than it used to be, which may prompt a shift in thinking, Smith says.

“For many Australian advisers, that line from their clients that they already own an investment property effectively ends the conversation about further investment before it begins.

“But owning one or two Australian assets is not the same thing as owning a genuinely diversified global property allocation.

“Concentration in a single geography, structure or sector can erode the portfolio benefits real estate is meant to provide. But a well-diversified pooled vehicle can preserve those benefits and reduce concentration risk. Institutional investors have understood this for years.

“The global opportunity set offers deeper diversification across regions, sectors and structures because of its access to institutional and off-market transactions, and the ability to participate in operational businesses and platform profits. At the same time, the global real-estate cycle is now offering better relative-value opportunities, precisely because repricing and recovery are not happening everywhere at once.

“It offers something Australian direct property often cannot – genuine global diversification, income backed by structural demand drivers, and access to active operational value creation, rather than passive rent clipping alone.

“None of this means advisers should treat the fund as a drop-in substitute for risk-free income.

“Private real estate carries liquidity, currency, valuation, tenant, development and market risks, and the semi-liquid structure uses managed liquidity rather than daily dealing.”

But she says, for advisers and consultants who want property exposure to do more than concentrate clients in one country, one tax code and one familiar asset class, a global real estate fund could be the answer.

“Global exposure gives advisers access to the part of the opportunity set that local direct ownership usually misses – different policy environments, different demographic drivers, different economic cycles, different repricing speeds, different occupier markets and different lease structures.

“This is particularly relevant in the current environment. The traditional Australian direct property model may look materially less attractive in the years ahead as proposed changes to negative gearing and capital gains tax concessions begin to reshape the post-tax return profile of local property investing.”

For advisers, that changes the conversation, Smith says.

“Australian direct residential property has often been sold not only as a growth asset, but as a tax-aware strategy. But if the tax shield is being narrowed for future purchases of established housing, then the investment case has to stand more squarely on underlying economics.

“That is where a globally diversified real-estate strategy starts to look more compelling because it does not depend on a single domestic tax regime to do the heavy lifting. Instead, it earns its keep through portfolio construction, sector selection, local execution and operational value creation.”

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Claire Smith

Schroders says fears around artificial intelligence (AI) disrupting software businesses have been overblown, with private equity investors taking a far more selective and measured approach than public markets.

Claire Smith, head of investment directors, public and private markets at Schroders, said investors had adopted a “guilty until proven innocent” mentality toward software companies, despite many businesses remaining deeply embedded in their customers’ operations.

“We think the market has overreacted,” said Smith.

“There’s been a view that AI is killing software. AI is absolutely reshaping parts of the software market, but the idea that every software company is suddenly at risk simply isn’t how private investors are thinking about it.

“When you look underneath the surface, many of these businesses still have highly sticky customer bases, proprietary data and critical functionality.”

Smith said Schroders had conducted a detailed “AI threat assessment matrix” across its software investments to determine which businesses faced genuine disruption risk and which were likely to remain resilient.

“We assessed whether AI could reduce the number of software seats being sold, or potentially make a platform redundant altogether,” she said.

“In our semi-liquid private equity fund, only around 2 per cent of the portfolio fell into what we classified as high risk.”

Smith said software businesses servicing highly specialised industries, particularly those handling sensitive or operationally critical data, remained difficult to replace.

“You’re not going to vibe-code your way around payroll systems handling confidential patient data. Businesses still need reliability, compliance and security. AI is not eliminating that,” she said.

Private equity valuations had also been less volatile than listed markets because private investors were not caught up in the rapid repricing of large US technology stocks.

“At one point we were valuing our portfolio at a 40 per cent discount to listed markets,” Smith said.

“That discipline meant when listed markets sold off, we didn’t experience the same level of volatility.”

While AI disruption remains a risk for some companies, Smith said the technology was also creating significant investment opportunities.

“We have invested in AI-linked businesses including a data annotation company servicing major artificial intelligence groups including OpenAI, Meta and Nvidia. We prefer businesses that are benefiting from the growth in AI infrastructure, rather than trying to predict which individual AI applications will ultimately win,” said Smith.

Beyond technology, Smith said many of the strongest private equity opportunities continued to come from stable, cash-generative businesses operating in niche industries.

“Sometimes the best investments are the boring ones. We look for companies with recurring revenues, strong customer relationships and services that businesses simply cannot switch off during difficult economic periods,” she said.

Smith said a growing number of opportunities were also emerging from founder-led and family-owned businesses globally as ageing owners seek succession solutions.

“Private equity can provide the capital and expertise to help these businesses continue growing while preserving the legacy founders have built,” she added.

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