Tom Goodrich

United States

Wall Street vs Main Street

Our recent journey across the United States, touching base in bustling hubs like New York and Boston, offered a fascinating glimpse into the current sentiment within the largest global economy.

There is still a constant hum of activity on the streets despite the heightened political climate, murmurs of US exceptionalism waning, and some cautiousness in financial markets.

Uncertainty regarding President Donald Trump’s potential fiscal and foreign policies continues to drive the sentiment on Wall Street. Even with some confirmed trade deals, the unpredictable nature and scale of tariffs remain an ongoing issue.

This apprehension has led to a noticeable shift in how some fund managers positioned their investments during or soon after “Liberation Day”. Many strategically moved towards what they consider “tariff-proof” stocks. This typically meant increasing their exposure to companies that are leaders in their domestic markets (whether that be in the US or outside), thereby reducing the potential impact of unpredictable international trade disputes.

Artificial Intelligence (AI)

I continues to be a hot topic; however, the divergence in performance between the Magnificent 7 constituents throughout 2025 has delivered a different environment for fund managers to adapt to compared to the index concentration of the 12 months prior.

Rather than betting on pure AI companies, most managers are focusing on what are known as “picks and shovels” stocks. These companies sell or maintain the essential infrastructure for AI businesses to function, such as semiconductors, data centres, companies involved in power generation, and even those providing ventilation and air conditioning.

The key takeaway is that there are multiple ways to win from the exponential growth of AI, with managers spreading their exposure to maintain diversification whilst investing in the beneficiaries of the new technology.

On a lighter but notable point, the traditional business card seems to be a thing of the past, and ties have officially followed suit!

By Tom Goodrich, Senior Investment Analyst & Ethan Spiegel, Investment Analyst

United Kingdom

Amongst much gloating from UK-based portfolio managers on the Lions and Wallabies result, there were two key themes from our recent trip to Edinburgh and London.

Corporate consolidation

The UK asset management landscape has been buzzing with corporate activity, mirroring a trend we have seen in Australia. There has been a noticeable increase in mergers and acquisitions in the asset management space, as parties seek scale and broaden their reach. There were several examples of this over the past 12 months, with BNP Paribas acquiring AXA IM, Impax obtaining SKY Harbor Capital, and Foresight Group purchasing WHEB Asset Management.

Responsible investment landscape

The other thematic was the evolving regulatory and political landscape regarding responsible investment strategies. At present, ESG labelling is in a state of change. The introduction of the UK’s Sustainability Disclosure Requirements (SDR) provided welcome guidelines for products in the region, whilst the Australian and EU regulators currently assess (and re-assess) their labelling requirements. These regulations aim to provide greater clarity and transparency regarding the sustainability credentials of investment products. Since their introduction, labelling requirements have prompted many strategies to be renamed, with fund managers generally opting for consistency across regions. Locally, we have seen several changes to fund names as a result.

Within the sustainability-focused subset, global equity impact managers have faced significant performance headwinds. Much of this has been apportioned to the lengths the Trump administration has gone to to repeal environmentally focused elements of the Inflation Reduction Act. This has resulted in the closure of several such impact managers in the UK market, underscoring the evolving dynamics within the responsible investing space and the importance of closely assessing longevity risk when considering allocations.

What’s next?

Looking ahead, we anticipate a busy summer for UK-based fund managers engaging with the Australian market, conveniently aligning with England seeking its first Ashes win in Australia since 2011. Let’s hope for a little less gloating this time around!

By Jock Allen, Senior Investment Analyst & Stephen Colwell, Senior Investment Analyst 

Jock Allen

In an environment of increased market volatility, investors can look to market neutral strategies to generate attractive returns with reduced risk, according to Zenith Investment Partners senior investment analyst Jock Allen.

“With equities going up, down, and sideways, it can be challenging to determine where to invest your client’s money,” Allen says.

“Market neutral strategies are a good alternative in this environment. They can deliver absolute returns that are uncorrelated to the broader equity market returns.

“Unlike traditional equity investments, market neutral managers hold offsetting long and short positions, resulting in a portfolio with limited equity market risk exposure and returns predominantly driven by stock-specific risk.”

Allen says while the perception is that all market neutral managers are the same, and follow a single approach, this is not the case.

“The approaches undertaken by market neutral managers can vary significantly and lead to drastically different exposures along the risk/return spectrum.”

To illustrate this variation in approach among market neutral managers, Zenith undertook research classifying the rated market neutral funds into three categories based on their risk and return characteristics – stable, balanced and return seeking.

“In classifying the products into these categories, we considered the typical leverage employed, realised volatility, and the historical ability to protect capital,” Allen says.

The research found that risk levels progressively increased across the three categories, with each category offering a markedly different risk and return profile (see chart below)

Source: Zenith Investment Partners

Allen said the research also shows a marked reduction in volatility for market neutral funds.

“As the chart below shows, all three categories demonstrated significant volatility reduction relative to the S&P/ASX 300 Index, with the relative reduction between categories remaining broadly consistent over the assessed period,” he says.

Source: Zenith Investment Partners

“From a drawdown perspective, the market neutral strategies were also successful in protecting investor capital in declining markets,” Allen says.

Source: Zenith Investment Partners

“The stable category protected capital most effectively, while the return-seeking funds experienced larger relative drawdowns,” he says.

“Our analysis is clear. Despite increasing market volatility, Zenith rated market neutral strategies offer investors a compelling avenue for attractive and uncorrelated returns,” Allen concludes.

]]>

Jock Allen

In an environment of increased market volatility, investors can look to market neutral strategies to generate attractive returns with reduced risk, according to Zenith Investment Partners senior investment analyst Jock Allen.

“With equities going up, down, and sideways, it can be challenging to determine where to invest your client’s money,” Allen says.

“Market neutral strategies are a good alternative in this environment. They can deliver absolute returns that are uncorrelated to the broader equity market returns.

“Unlike traditional equity investments, market neutral managers hold offsetting long and short positions, resulting in a portfolio with limited equity market risk exposure and returns predominantly driven by stock-specific risk.”

Allen says while the perception is that all market neutral managers are the same, and follow a single approach, this is not the case.

“The approaches undertaken by market neutral managers can vary significantly and lead to drastically different exposures along the risk/return spectrum.”

To illustrate this variation in approach among market neutral managers, Zenith undertook research classifying the rated market neutral funds into three categories based on their risk and return characteristics – stable, balanced and return seeking.

“In classifying the products into these categories, we considered the typical leverage employed, realised volatility, and the historical ability to protect capital,” Allen says.

The research found that risk levels progressively increased across the three categories, with each category offering a markedly different risk and return profile (see chart below)

Source: Zenith Investment Partners

Allen said the research also shows a marked reduction in volatility for market neutral funds.

“As the chart below shows, all three categories demonstrated significant volatility reduction relative to the S&P/ASX 300 Index, with the relative reduction between categories remaining broadly consistent over the assessed period,” he says.

Source: Zenith Investment Partners

“From a drawdown perspective, the market neutral strategies were also successful in protecting investor capital in declining markets,” Allen says.

Source: Zenith Investment Partners

“The stable category protected capital most effectively, while the return-seeking funds experienced larger relative drawdowns,” he says.

“Our analysis is clear. Despite increasing market volatility, Zenith rated market neutral strategies offer investors a compelling avenue for attractive and uncorrelated returns,” Allen concludes.

The post Market neutral strategies a powerful tool in volatile markets appeared first on AdviserVoice.