More than 60 percent of advisers were bullish or very bullish on Australian small caps over the coming six months. This sentiment was also reflected in global small caps (57%) and emerging markets (53%).

In global equities, 44 percent of advisers identified technology as offering the best sector opportunities, while 30 percent of advisers favoured resources in the local market.

Evan Reedman, General Manager of Affiliates at Fidante, noted that while 68 percent of advisers still expect large-cap Australian equities to continue to perform strongly in the next six months, they were increasingly seeking opportunities beyond traditional equity exposures, driven by broader market uncertainty and high valuations.

“Large cap equities remain the ‘engine room’ for portfolio returns, but our survey revealed a clear focus among advisers on increasing satellite allocations in both Australian and global small caps,” Mr Reedman said.

Anticipating outperformance, the research showed advisers plan to significantly increase allocations to Australian small caps (44%) and global small caps (42%). Yet a more risk-aware approach was reflected in emerging markets, with only 23 percent of advisers planning to increase client allocations to the sector.

“Small caps have performed well, have historically offered a return premium, and can help to reduce concentration risk. In emerging markets, the story is more nuanced,” Mr Reedman said.

“Emerging market valuations are extremely attractive and recent performance has been strong. However, the associated risks are elevated. While opportunities vary across markets, current geopolitical tensions relating to China have contributed to a cautious approach among advisers.

“The current sentiment clearly highlights the need for an active, specialist approach to exploring opportunities in this asset class.”

Advisers diversify beyond equities

High valuations were the primary concern in both local and global equity markets. Almost 40 percent of advisers noted valuation concerns in Australian equities, while valuations overtook Trump as the primary concern in global markets (30%).

“Interestingly, concerns surrounding the Trump administration have more than halved since reaching fever pitch when we last surveyed advisers in April,” Mr Reedman said. “However, we are still seeing this dynamic play out. This includes rising concerns over inflation risk in global equities, driven by tariffs and Trump’s pressure on the Fed to cut rates, which may pose a notable threat to global markets.”

To combat these mounting concerns, advisers are looking beyond equities to deliver alpha for their clients. Today, 77 percent of advisers allocate up to 10 percent of client portfolios to alternative assets.

Infrastructure (21%), private credit (17%), and private equity (16%) were the key beneficiaries of this trend. Perhaps surprisingly, only 10 percent of advisers planned to allocate to commodities in the coming six months, despite gold reaching record highs.

“We are seeing strong demand for alternative assets that offer defence and diversification from traditional asset classes. We expect this to continue as more advisers and investors realise the power of unlocking alternatives in portfolios,” Mr Reedman said.

“Rightly, advisers are exercising caution when exploring this asset class, balancing risks, such as liquidity, against the return premiums on offer. A focus on governance and due diligence is also driving demand to well-established managers who have a proven track record across market cycles.”

Read the research.

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The survey of 174 financial advisers^[1] conducted in April during heightened volatility following President Trump’s tariff announcements, reveals that four in 10 advisers are now bearish on both US equities (44%) and Australian equities (39%).

Views were split on what would come next: one in three (31%) expected the Australian and US share market to bounce back within six months, while 29% expected markets to fall further, and 26% expected it to stay about the same.

Since the survey was conducted, global markets have rebounded, with indices such as the Nasdaq now trading above pre-announcement levels following a pause in US-China tariff escalation.

Evan Reedman, General Manager, Fidante Affiliates, said the survey captures how financial advisers responded in real-time to the sharp and unexpected shift in market sentiment.

“The markets reacted strongly to the US tariff announcements, triggering sharp swings in investor sentiment both globally and locally,” Mr Reedman said. “This was an unexpected jolt, but advisers largely stayed the course with the majority expecting client allocations to Australian and US equities to remain steady as they assessed how volatility would play out.”

“Markets have since rebounded and this instinct to remain disciplined has proven correct. It reinforces the value of financial advice in helping investors navigate market uncertainty and to ensure their portfolios are protected across market cycles.”

In November 2024, Fidante’s inaugural Adviser Markets Survey found advisers were most concerned about high equity valuations and inflation. In the latest edition, those fears have been overtaken, with one in two advisers (50%) ranking Trump’s economic policies and tariffs as their main top concern today.

Advisers searching for alternative sources of alpha

Over the past 12 months, the US equity market has been favoured by investors, delivering out-sized returns, driven largely by the strong performance of the ‘Magnificent 7’ tech stocks. As the market corrects, and the US loses some of its lustre, advisers are looking to alternate sources of alpha to drive returns in 2025.

In the next six months, one in three advisers plan to increase allocations to global equity small caps (32%), while a similar proportion are looking to increase their exposure to emerging markets equities (31%), and Australian equity small caps (30%).

Alternative assets are also high on the radar, with advisers looking to increase allocation to infrastructure (29%), private equity (22%), and private credit (21%).

“While following the crowd and investing in the big US tech stocks has driven outsized returns for investors in recent years, looking ahead more active sector and stock selection is going to come to the fore,” Mr Reedman said.

“It is likely global macroeconomic and geopolitical tensions will continue and for investors that means navigating a period of ongoing uncertainty and volatility. Advisers have been quick to look further afield for pockets of opportunities – such as emerging markets, small caps, and private markets – that can provide both diversification and alpha to a client’s portfolio.”

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[1] Fidante Adviser Markets Survey completed by 174 financial advisers between 1 April – 15 April 2025.

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Evan Reedman

Vanguard Australia has launched the Vanguard Active Positive Impact Fund, expanding its ESG and Active line-up to include a global equity fund seeking to outperform the broad global equities market while having a measurable impact on global environmental and social challenges.

Vanguard has appointed Baillie Gifford to manage the fund given their consistent framework for identifying high-quality growth companies that are driving solutions to global issues, as well as their significant expertise in fundamental equity research.

Evan Reedman, Head of Product at Vanguard Australia, said Vanguard continues to seek ways to deliver high quality and enduring ESG strategies to investors.

“We are thoughtfully broadening our ESG line-up with solutions that enable investors to align investment objectives with personal preferences and ESG considerations,” Mr Reedman said.

“Australian investors are increasingly weighing ESG factors alongside more traditional considerations such as risk and return. This fund allows investors to target positive impact alongside financial outperformance.

“Impact investing, an investing style targeting a dual objective of generating long term returns and a positive social or environmental outcome, requires creativity and patience. We believe Baillie Gifford’s diverse team and commitment to thinking in decades rather than quarters is well suited to this style of investing.”

Baillie Gifford actively manages the portfolio of typically 25 to 50 global companies seeking long-term outperformance and positive impact in areas including: Social Inclusion and Education, Healthcare and Quality of Life, Environment and Resource Needs and Base of the Pyramid (addressing needs of the world’s poorest populations).

The fund aims to hold securities for at least five years, which generally results in relatively low portfolio turnover and is in line with the Fund’s long-term investment outlook.

Rosemary Shannon, Head of Australia for Baillie Gifford said: “Core to our philosophy is a belief that investment returns, and impact go hand in hand. In seeking out companies whose products and services are providing solutions to global challenges, we believe a proactive investment approach can also be the basis of attractive investment returns. Everyone wants to make a difference, and capital thoughtfully and responsibly deployed is a powerful mechanism for change.”

Globally, Vanguard has been offering ESG products for over 20 years. With the launch of the Vanguard Active Positive Impact Fund, Vanguard Australia’s ESG product range now includes three ETFs and five managed funds.

“Our suite of ESG index products include exclusionary-screened equity and fixed income index funds and ETFs which serve investors who want to avoid or reduce exposure to certain sectors or business-related activities that pose heightened ESG-related risks or conflict with their personal values,” said Mr Reedman.

“Vanguard believes that an active approach to impact investing enables skilled managers to better navigate the complexities of identifying companies driving positive change to build a portfolio with the potential to deliver on outperformance and impact objectives”.

The new fund will soon be available to investors on the Vanguard Personal Investor platform for a low management fee of 0.79%, compared to similar funds in its category. Vanguard will list the Fund on third party platforms in due course.

The new product adds to Vanguard Australia’s diverse offering of index and actively managed funds and ETFs, bringing the total number of fund offerings to 80, including 27 ETFs.

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Evan Reedman

Vanguard has announced it will lower the cost of several of its Australian fixed interest funds, as part of an ongoing commitment to keeping costs low whilst delivering high-value products.

Fees on Vanguard’s Australian Fixed Interest Fund and Exchange Traded Fund (ETF) will be reduced from 0.24% to 0.19% and 0.20% to 0.15% respectively. Fees on the Vanguard Australian Corporate Fixed Interest Index Fund will also be reduced from 0.29% to 0.24% and the ETF from 0.26% to 0.20%.^[1]

“Keeping costs low on our broadly diversified funds is one of the many ways we continue to support Australian investors to achieve their financial goals,” said Evan Reedman, Vanguard Australia’s Head of Product.

“We are pleased to pass on cost savings to our investors as the growth and maturity of our funds continues to drive efficiencies of scale,” said Mr Reedman.

The Vanguard Australian Fixed Interest and Corporate Fixed Interest funds are designed to provide investors with access to diversified, broad market access to government and corporate-issued bonds. As a result of their growth, they hold more securities compared to their peers and can track tighter against their indices.

“Persistently low yields have led some investors to question the role of bonds in a long-term financial plan, potentially overlooking the key function of bonds in a well-diversified portfolio. As a defensive asset, bonds serve to cushion an investment portfolio and can help smooth out an otherwise anxiety-inducing ride during periods of market volatility, said Mr Reedman.

“And if there is one lesson to be learnt from the last 18 months, it is that uncertainty induced volatility is here to stay.

“For advisers, having lower cost, high quality fixed interest choices available in this environment is critical to ensure they can continue to harness the critical role of bonds and effectively diversify client portfolios.”

The fee reductions will take effect on 1 October 2021 and highlight how Vanguard’s Australian investors continue to benefit from the growth of Vanguard Australia’s funds and an ongoing commitment to give Australians the best chance of investment success.

Vanguard continues to ensure our entire fund range comprises high quality and low-cost solutions for Australian investors and over the past ten years alone Vanguard has delivered more than 40 fee cuts across our growing range of active and index investment offerings.

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[1] Please see Summary of Fee Changes table outlining upcoming fee changes.

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Evan Reedman

Vanguard has announced its new Manager Select Series, a range of low cost actively managed funds employing world-leading active management talent.

The new funds include the Vanguard Active Global Growth Fund managed by Baillie Gifford; the Vanguard Active Emerging Markets Equity Fund managed by Wellington Management, and the Vanguard Active Global Credit Bond Fund managed by Vanguard’s Fixed Income Group.

Both equity funds are available for investment from today, with the global credit bond fund becoming available for investment in the coming weeks. The funds are wholesale offerings, available directly from Vanguard subject to investment minimums, and in time through adviser distribution platforms.

The three new funds represent Vanguard’s first offering of fundamental active management to Australian investors, specifically designed to offer more low cost choice and delivering on Vanguard’s promise of driving down the cost of investing in all the markets it serves.

Vanguard has successfully been helping clients from across the globe gain low-cost access to high quality active managers for over 40 years. This launch reaffirms Vanguard’s commitment to giving Australian investors the best chance of success by providing access to talented global managers and reducing the cost of active management in this market.

Commenting on the launch Evan Reedman, Head of Product and Marketing at Vanguard Australia said “Although we are best known for our index management, we’ve managed active funds at Vanguard since our beginnings in 1975, and active management accounts for about a quarter of Vanguard’s global assets under management.

“This launch marks an important milestone for Vanguard in Australia. Knowing that high costs represent a big headwind to outperformance, we can make a big difference for Australian investors in the future through introducing a lower cost alternative to traditional active management fee structures.

“This new series of funds follow our introduction of a range of active factor fund and ETF offerings over the past couple of years, with Vanguard broadening low cost choice across a range of investment styles to suit investors’ individual needs and objectives”, Mr Reedman said.

Vanguard Active Global Growth Fund

The Vanguard Active Global Growth Fund is a global equity strategy investing in businesses which enjoy sustainable, competitive advantages growing their earnings at a faster rate than the market over the long term. Share selection is bottom-up and based on proprietary fundamental analysis.

The fund will have a base fee of 0.60% p.a., versus a category average of 1.06%¹. The portfolio invests in 70 -120 growth shares with a long-term investment horizon, resulting in a low portfolio turnover.

In addition, the fund will employ a unique performance fee that participates both in outperformance and underperformance – which all active managers will experience from time to time – aligning the interests of the fund’s investment manager and its investors. This fee will be capped so that investors can expect a premium or discount to the fund’s base fee of +/- 0.0825% p.a.

The fund may be suitable for investors who are seeking long-term outperformance within the global equity sleeve of their portfolio either as a substitute for a current global growth strategy or to increase diversification in a portfolio overweight in Australian equities.

The strategy is managed by three of Baillie Gifford’s partners, all of whom have been managing this strategy since its inception in 2005 and have an average tenure of over 24 years. Baillie Gifford is a Scottish investment firm founded in 1908 with an investment approach differentiated by being very long-term, optimistic, growth-orientated, and high-conviction.

Vanguard Active Emerging Markets Equity Fund

The Vanguard Active Emerging Market Equity Fund consists of over 100 emerging market shares that capitalise on bottom-up fundamental research.

The Vanguard Active Emerging Market Equity Fund will have a base fee of 0.88% p.a., versus an average cost in this category of 1.15%². This Fund will also employ the same performance fee arrangement as the Vanguard Active Global Growth Fund, participating both in outperformance and underperformance, capped at +/-0.165% p.a.

Managed by Wellington Management, Vanguard’s longest standing external active adviser, the investment team is a group of dedicated global industry analysts with unparalleled access to company management. They possess an average of 19 years of professional experience and have developed in-depth industry knowledge.

Through this experience each analyst has developed a framework that has proven most relevant to their philosophy, process and industry, with a simple share selection criterion: highest expected total return.

This strategy may be suitable for investors looking to enhance the risk-adjusted return of their portfolio over the long term. It could be considered as a substitute to a higher cost emerging market active manager; to complement a current exposure or diversify manager risk, or to increase a portfolio’s allocation to emerging markets with a low cost, diversified solution.

Vanguard Active Global Credit Bond Fund

The Vanguard Active Global Credit Bond Fund is designed to provide investors with a moderate and sustainable level of income by investing in a well-diversified portfolio of investment grade global credit fixed income bonds.

The fund will be offered at a fee of 0.40% p.a., versus the category average of 0.60%³, and will be open for investment in the coming weeks.

The objective of the fund is to outperform the Bloomberg Barclays Global Aggregate Credit Index in Australian dollars, by employing a fundamental approach to identifying the most attractive investment opportunities across the global credit universe.

The fund is highly diversified with investments focused on global investment grade credit markets.

Vanguard’s fixed income group will manage the fund globally with teams based in the US, UK, Australia and Hong Kong. Trading, management and research will be conducted across all regions. The group collectively have over 35 years of experience managing active fixed income portfolios, with Vanguard’s first active bond fund launched in 1982.

An active management leader

Vanguard has deep global roots in active management and partners with the world’s top active managers to provide clients with a diverse range of active funds.

Today, Vanguard’s actively managed mutual funds represent USD$1.4 trillion (AUD$2 trillion); USD$620 billion of which is managed by external advisers, including traditional active equity, bond, and balanced assets; USD$660 billion by managed the Vanguard Fixed Income Group, including taxable and tax-exempt bonds, and money market funds; and USD$40 billion managed by the Vanguard Quantitative Equity Group.

Vanguard currently partners with 25 advisers globally. As one of Vanguard’s longest serving advisers, Wellington Management currently manages in excess of USD$1 trillion in assets under management, and more than USD$360 billion on behalf of Vanguard funds globally across a variety of mandates.

Baillie Gifford, a Scottish investment firm founded in 1908, is one of the largest independently owned investment management firms in the United Kingdom and manages money primarily for institutional clients with AUD$355 billion in assets.

Vanguard’s Manager selection and oversight process

“Vanguard believes there are three critical factors which enable outperformance – top talent, low cost and patience – and these factors have guided our selection of active managers for these funds.

“These new funds source the best managers from around the world, a process which has been a fundamental part of our global active business for over forty years. We go to great lengths to identify and select talented global managers that meet the needs of local investors”, said Mr Reedman.

Vanguard’s Portfolio Review Department (PRD) has full-time responsibility for manager search and fund oversight. The department’s 22 investment professionals attend more than 200 meetings with prospective managers annually and have regular conference calls and site visits with current managers. In addition, Vanguard’s Global Investment Committee – a senior management panel led by Vanguard CEO Tim Buckley – meets annually with each manager.

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Notes:
1) Vanguard calculation using Morningstar data. Asset weighted management fee of funds included in the Australia Fund Equity World Large (inclusive of Blend, Growth and Value) category, excluding funds categorised as index or enhanced index. As at 30 June 2019. 321 funds included in sample.
2) Vanguard calculation using Morningstar data. Asset weighted management fee of funds included in the Australia Fund Equity Emerging Markets category, excluding funds categorised as index or enhanced index. As at 30 June 2019. 55 funds included in sample.
3) Vanguard calculation using Morningstar data. Asset weighted management fee of funds included in the Australia Fund Diversified Credit category, excluding funds categorised as index or enhanced index. As at 30 June 2019. 69 funds included in sample.

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Evan Reedman

Vanguard Australia has announced the launch of a range of Environmental, Social and Governance (ESG) funds, providing greater choice for investors who wish to reflect their values in their investment holdings.

The Vanguard Ethically Conscious International Shares Index Fund and Vanguard Ethically Conscious Global Aggregate Bond Index Fund will offer investors access to broadly diversified international equities and international fixed income exposures that exclude fossil fuel reserves, alcohol, tobacco, gambling, weapons, nuclear power and adult entertainment. The new managed funds are available to investors now and will be offered as exchange traded funds (ETFs) from September 2018.

The Vanguard Ethically Conscious International Shares Index Fund and ETF (ASX:VESG) will provide exposure to over 1,600 securities listed in major developed countries, at a low management expense ratio of 0.20 per cent and 0.18 per cent respectively.

The Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) and the ETF (ASX:VEFI) include exposure to over 18,000 fixed income securities in major developed and emerging countries, and will be available at 0.28 per cent for the managed fund, and 0.26 per cent for the ETF.

The managed fund offerings will provide investors both hedged and unhedged options.

Evan Reedman, Vanguard Australia’s Head of Product and Marketing, said Vanguard was committed to offering greater choice to investors while maintaining broad diversification at a low cost.

“We understand that some investors want products that allow them to achieve their investment objectives while also investing in line with their values. We are pleased to be offering ESG equities and fixed income funds that meet this need while maintaining the hallmarks of Vanguard funds, low cost and broad diversification,” Mr Reedman said.

The funds add to Vanguard Australia’s existing ESG offering, joining the Vanguard International Shares Select Exclusions Index Fund that was launched in November 2016.
“We have been offering screened ESG products internationally for almost 20 years and are excited to be able to provide more choice for Australian investors while leveraging our global scale and investment management expertise,” Mr Reedman said.

The Vanguard Ethically Conscious International Shares Index Funds track the FTSE Developed ex Australia ex Non-Renewable Energy/Vice Products/Weapons Index, while the Vanguard Ethically Conscious Global Aggregate Bond Index Funds track the Bloomberg Barclays MSCI Global Aggregate ex SRI Exclusions Index hedged to Australian dollars.

Evan Ong, Managing Director, Asia ETP and listed derivatives strategy and business development, FTSE Russell said “We are pleased Vanguard has selected the FTSE Developed ex Australia ex Non-Renewable Energy/Vice Products/Weapons Index to offer investors a choice of aligning their values with their exposure to global equities. The index forms part of the FTSE Global Choice Index Series, and the comprehensive screening methodology helps meet continued demand for investment products that incorporate company impact on the society and the environment.”

Chris Hackel, Index Product Manager at Bloomberg said “As responsible investing continues to grow as a global theme, Bloomberg is committed to providing a comprehensive family of ESG-integrated fixed income benchmarks. We are pleased to work with Vanguard on this new ETF for fixed income ESG investors in Australia.”

The new products will add to Vanguard Australia’s diverse offering of index and active managed funds and ETFs, bringing the total number of fund offerings to 76, including 26 ETFs.

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