Reece Birtles

Australian equities delivered a strong performance in 2025, with the S&P/ASX 200 rising more than 10%^[1]), supported by a falling interest rate environment and easing inflation pressures. Market leadership was defined by a rotation toward higher-beta exposures, while expensive growth stocks lagged, reflecting shifting macro conditions and changing investor preferences.

According to ClearBridge Investments’ head of Australian equities, Reece Birtles, the year marked an important inflection point for value-style investing, even as valuation dispersion across the market remains historically wide.

“We are still early in the process of value reasserting itself. The disconnect between share prices and fundamental valuation remains wide, but the market is starting to show classic signs that the momentum phase, and crowded, index-dominated growth names are losing their shine.

“Importantly, value-style stocks continue to be a low-beta, a lower-risk expression, providing fundamental earnings resilience in the current environment. Just as we saw during the Tech Bubble, in periods of exuberance rather than crisis, value provides downside protection precisely when euphoria unwinds.

“Despite this, many investors remain heavily skewed toward growth exposures, leaving their portfolios vulnerable if the full rotation toward value accelerates,” he notes.

Australia’s earnings outlook has also strengthened materially, particularly relative to offshore markets. He highlights a sharp turnaround in earnings per share (EPS) expectations following the August 2025 reporting season.

“We’ve seen significant upgrades to expected EPS growth, moving closer to double-digit territory,” Birtles says. “That has been concentrated in resources, driven by iron ore at the index level, but also supported by copper, gold, lithium and rare earths. We expect to see stronger commodity prices improve Australia’s terms of trade and drive nominal GDP growth. That’s a great predictor for the revenue, earnings and dividend growth of Australian companies more broadly.”

Importantly, Australian consumer confidence and business condition surveys are now showing stronger readings than their US counterparts.

“On a relative basis, Australia had been a laggard globally for EPS growth, but heading into 2026, it’s starting to look materially stronger.”

The widening valuation dispersion has created a fertile environment for active managers focused on quality and risk discipline, Birtles notes.

“Alpha and risk come from two things – stock selection and style risk. Given the extreme valuation spread within quality companies, this has been a very rich stock-picking environment for our style of investing.”

Among the holdings that have contributed positively across ClearBridge portfolios are ANZ Banking Group, Lynas Rare Earths, BHP Group, Ventia Services Group and Downer EDI.

The firm also sees continued opportunity in specialist income portfolios, driven by attractive valuations and accelerating dividend growth.

“We expect income portfolios to deliver compelling yields this year, with expected franked income and growth well above the broader market. The companies we invest in are attractively valued, yet they are growing earnings and dividends faster than the market. In contrast, many expensive technology names and passive darlings are offering little, if any, earnings or dividend growth,” Birtles says.

 ———

Notes:
[1] S&P Global, ‘S&P/ASX 200 Fact Sheet’, Calendar-year 2025 return.

The post Earnings momentum signals a new phase for Australian equities appeared first on AdviserVoice.

Felicity Walsh

Franklin Templeton has completed the global integration of Martin Currie’s investment capabilities into ClearBridge Investments. This marks a significant milestone in Franklin Templeton’s business strategy in Australia, reinforcing its commitment to local investors and to Australian based investment capabilities.

This strategic alignment brings together two highly complementary businesses in terms of culture and investment approach and will see Australian Equities and Emerging Markets strategies added to ClearBridge’s existing global equity and infrastructure offering.

Franklin Templeton will now oversee the distribution of the full suite of ClearBridge strategies to institutional and wholesale clients across Australia and New Zealand.

Felicity Walsh, Franklin Templeton’s Managing Director for Australia and New Zealand, emphasised the significance of this integration: “Franklin Templeton’s completion of the Martin Currie integration is a crucial step in our commitment to the Australian market. Bringing together these highly complementary businesses under ClearBridge Investments strengthens our ability to deliver tailored solutions across all segments of the Australian market”.

For the Martin Currie team, being part of ClearBridge Investments means leveraging additional resources and scale, including research capabilities- and expanded trading capabilities. The integration also aligns with their shared commitment to sustainability and ESG analysis.

Scott Glasser, Chief Investment Officer at ClearBridge, highlighted the complementary strengths of the combined investment offering. “We are excited to bring these strategies under the ClearBridge umbrella while remaining true to the investment philosophy that has driven their success. ClearBridge and Martin Currie are highly aligned in investment approach and culture, making this a natural evolution,” Glasser said.

Reece Birtles, now Head of Australian Equities at ClearBridge Investments, reiterated that the quality and integrity of their Australian equity strategies remain unchanged.

“Our clients can be confident that our Australian equity strategies will continue to be managed with the same disciplined process, deep fundamental research and active management approach that have delivered strong outcomes over many years,” Birtles said. “Under the ClearBridge brand, we remain committed to offering a comprehensive suite of capabilities that help our clients achieve their long-term investment objectives.”

Walsh further highlighted the benefits of the integration for Australian investors: “In a rapidly evolving industry, the need for scale, stability and innovation is critical. This integration demonstrates our commitment to Australian investors and our mission to partner with them for long-term success.”

The post Franklin Templeton completes Martin Currie integration with ClearBridge, further strengthening Australian market presence appeared first on AdviserVoice.

Reece Birtles

Franklin Templeton has announced the launch of the Martin Currie Real Income Fund – Active ETF, an active ETF now available on the ASX under the ticker R3AL, further expanding its suite of exchange-traded investment solutions for Australian investors.

The Martin Currie Real Income Fund has a proven 15-year track record, delivering higher income from reliable dividends alongside capital growth.

With an ETF structure, R3AL provides Australian investors with convenient access to the same long-term growth and attractive income characteristics as the Fund.

Key features include:

• Investments in essential building blocks of society have low economic sensitivity which typically exhibit lower total volatility than the broader market;
• High-quality assets with pricing power and inflation protection;
• Multi-sector blend offers broad and diverse opportunity set while avoiding concentration risks; and
• High transparency of listed pricing and liquidity benefits not typically found in direct or unlisted funds.

The Fund is managed by Portfolio Managers Ashton Reid and Andrew Chambers, in collaboration with the broader Martin Currie Australia investment team led by Chief Investment Officer Reece Birtles.

Reid highlighted, “With ongoing equity market volatility, investors are seeking stable and growing income streams. Real Assets are the backbone of society, so even in slower growth periods they offer a compelling, lower-risk income exposure.

“With positive earnings and dividend revisions now improving for quality Real Assets, the portfolio fundamentals look good. Unlike the unlisted world, listed Real Assets have now priced in higher interest rates so our portfolio offers attractive valuations.

“The investment universe includes diversified exposures to three listed Real Asset sectors – Real Estate Investment Trusts (REITs), infrastructure and utilities – from Australia and global developed markets that are driven by three secular megatrends. They include population growth which means more customers every day to maintain pricing power, energy demand that supports renewable generation, grid enhancements and electrification initiatives and the explosive technology and data driven by AI boosts demand for data centres, fibre networks and telco towers.

We see consistent yield and rising income growth, which makes for an appealing total return in an uncertain market.”

Chambers added, “Our diversification focus makes us highly differentiated from typical real asset offerings.  Concentrations in single sleeve global portfolios, especially towards the US, mean they are Global in name only, while Japan and Europe’s population peaks are Real Asset red flags that shouldn’t be ignored.”

“This launch underscores our ongoing commitment to deliver sophisticated yet accessible investment options to Australian investors,” said Felicity Walsh, Managing Director of Franklin Templeton Australia. “R3AL complements our existing range of active ETFs, including the Franklin Australian Absolute Return Bond Fund (Managed Fund) (ASX: FRAR) and the Franklin Global Growth Fund (Managed Fund) (ASX: FRGG).

“ETFs are increasingly being added to asset allocations across investment portfolios due to their flexibility, cost efficiency and ease of access. By bringing the Martin Currie Real Income Fund into an ETF structure, we are aligning with the evolving preferences of investors who want simple, transparent and scalable solutions to grow their wealth.

“The delivery of this income enhancing ETF reflects the firm’s ongoing dedication to empower investors with innovative tools to help them achieve their financial goals, backed by global expertise and deep local market insights,” said Walsh.

The post Franklin Templeton expands ETF offering with the introduction of the Martin Currie Real Income Fund – Active ETF (ASX: R3AL) appeared first on AdviserVoice.

Reece Birtles

Company results and communications from the recent August 2024 reporting season echo the poor conditions experienced back in 2019, according to Chief Investment Officer at Franklin Templeton specialist investment manager Martin Currie, Reece Birtles.

“The last 12 months’ returns for the key indices suggest the market is behaving as if a ‘Goldilocks’ economic landing is actually possible. Investors appear overly hopeful about the positive impacts of lower inflation and interest rates, ignoring the fact that lower inflation means a less desirable, slowing sales environment as consumers spend less,” Birtles said.

Current market price reactions to reporting season appear to be disregarding any evidence that contradicts the ‘Goldilocks’ narrative for the economy, leading to rising stock prices without the support of earnings growth.

Martin Currie conducted more than 100 meetings and engagements with company management teams during the reporting period and observed a disconnect between the share market exuberance and feedback from management.

“In our company engagements and visits, we noted general feedback that consumer demand weakness has now joined business demand weakness as a key issue. In previous reporting seasons consumer demand had been resilient and enough to maintain margins,” he said.

For the S&P/ASX 200 stocks that Martin Currie covers, they have assessed management guidance tone to have a two to one negative skew below what brokers were expecting before the results.

Not surprisingly, this has led to more than 40% of companies receiving downgrades to their EPS forecasts versus only a quarter receiving upgrades.

The biggest driver of the weak guidance from management was the slowing inflationary environment that everyone seems to be wishing for, which is making it a lot harder for companies to maintain or grow EPS.

“Given slowing inflation and poor revenue growth, pricing power and gross margin management have saved the results of many industrial companies, but with selling prices falling, it is making for quite a difficult margin expansion environment for many companies going forward,” Birtles said.

In some good news for companies, labour has gone from being one of the top headwinds to earnings, in terms of shortage and cost, to no longer being a constraint, or to even being an opportunity. Unfortunately, rising unemployment will eventually be a factor in dampening demand.

In the current market environment, Martin Currie believes that growth-style stocks remain expensive, while value stocks are still cheap relative to historical standards.

In this market, focus should be on companies with pricing power, resilient volumes, and the capacity to manage margins, while avoiding those with valuation risk.

“Normally it is said that risky stocks are the ones that are cheap, but at the moment, safety is actually not expensive. We are finding undervalued names that have defensive business characteristics or profit drivers less related to the broader economic cycle,” Birtles said.

Examples of these kinds of companies include South32, which has undertaken a significant business transformation focussed on copper and other materials needed for the energy transition; Worley, which will benefit from increased spend in renewables in future years; and Flight Centre Travel Group, which has made significant business efficiency improvements and is seeing ongoing demand growth.

The post Be careful what you wish for from reporting season appeared first on AdviserVoice.

Reece Birtles

Shareholders are increasingly concerned about companies becoming more conservative in their payout ratios and debt levels. According to data collated on S&P/ASX 200 companies, this current reporting season saw average payout ratio decrease from 62% to 53%, while the debt-to-revenue ratio has also dropped from 33% to 22% since pre-Covid.^[1]

“This retention of earnings, rather than reinvesting them into high-return growth opportunities, is a concern for shareholder value,” said Reece Birtles, chief investment officer at Martin Currie. “The lack of pressure on boards and management regarding this trend appears to be a byproduct of the momentum-driven market. As conditions shift, we hope to see a return to dividends as a core indicator of shareholder value.”

“For investors, dividends will continue to play an important role as they provide more reliable returns than capital gains and can act as a ‘safety net’ during heightened volatility,” he added.

However, there were some positive signs of capital management during this reporting period.

“We saw special dividends from companies like JB Hi-Fi, Super Retail Group, and Lottery Corporation, as well as improved payout ratios from Chorus, Commonwealth Bank, and Independence Group. Additionally, South32, Brambles, and Aurizon conducted buybacks,” noted Birtles.

“Conversely, several companies reduced their payout ratios, which unfortunately signals earnings stress. Companies such as Mineral Resources, Dexus, and Insignia were among those taking this action.”

Martin Currie has updated its income scorecard to reflect broker revisions post-reporting season and to track how companies have met dividend expectations over the last 12 months. It also analyses how dividend growth projections have changed and assessing if these stocks provide inflation protection.

“Our analysis highlighted the resource sector as an area of concern for income. While the sector delivered strong dividends relative to expectations over the past year, the outlook is now much more challenging, with most future dividend downgrades in this sector,” Birtles said. “Woodside, in particular, is a concern due to its M&A decision to invest in two new U.S. projects, which is putting pressure on its ability to maintain strong dividend payouts.”

“The banking sector also delivered solid earnings and reasonable dividends over the last 12 months. However, there’s been no change in forecasts due to stagnant underlying growth. For instance, Commonwealth Bank’s share price has surged in the past year, but with flat dividends, future yields have dropped significantly, leaving it below the bond yield—no longer qualifying as a strong dividend stock.”

———-
Notes:
[1] Source: Factset.

The post Companies hoarding earnings raises shareholder value concerns appeared first on AdviserVoice.

Felicity Walsh

Franklin Templeton specialist investment manager Martin Currie has been selected to manage an Equity Income mandate available on the Colonial First State FirstChoice platform.

“We are pleased to be awarded this mandate and recognised for our expertise in managing income-generating funds,” Franklin Templeton Managing Director, Australia and New Zealand, Felicity Walsh, said.

The appointment follows the announcement in April that the incumbent manager – First Sentier Investors (FSI) – would close all its Australian-based global credit, Australian fixed income, equity income and emerging companies’ teams.

“This appointment is a testament to the Martin Currie team’s unique investment approach that aligns stock selection and portfolio construction with the income needs of Australian clients, ” Walsh said.

The Martin Currie Equity Income Fund has a Recommended rating from Lonsec and a Highly Recommended rating from Zenith. It seeks to provide an after-tax income yield above the S&P/ASX 200 Index yield and grow that income above the rate of inflation.

“The Martin Currie Equity Income Fund aims to identify the most attractive income opportunities by combining extensive bottom-up fundamental and quantitative research with disciplined portfolio construction,” Reece Birtles, Chief Investment Officer at Martin Currie Australia, said.

“We also manage it in a tax-aware manner to maximise the benefit from franking credits for investors with a low or zero marginal tax rate,” he added.

Martin Currie embeds an “active ownership” approach into the investment process. In its engagement with companies the fund manager focusses on both materiality and ESG outcomes at the companies it invests in.

“We believe ESG analysis, engagement and voting should be done by those making investment decisions rather than being outsourced. Our research analysts and portfolio managers are best equipped to understand the ESG risks, opportunities, and impacts facing the companies they invest in, ” Birtles said.

The post Martin Currie awarded CFS Equity Income mandate appeared first on AdviserVoice.

Reece Birtles

Although a consensus ‘Goldilocks’ view prevails for Australia’s economy, analysis of the latest reporting season reveals that a hard landing is still a very real possibility, according to Reece Birtles, chief investment officer at Martin Currie Australia.

Commenting in the bi-annual reporting season paper Birtles says “After digesting the latest information from reporting season results and company meetings our analysis of the data and management commentary is that there is more pain ahead, and the path is edging closer to a hard landing,”

“The deteriorating state of the consumer, flatlining retail sales and falling company cashflows are the biggest risks to the downside. And the relief that things were ‘not as bad as feared’ has masked the extent of this deterioration,” he says.

It’s important to realise that at 1.5 per cent per annum, Australia’s real GDP in 2023 was the third worst annual reading in 30 years, worse even than during the GFC, but ahead of the 2020’s Covid and 2000 post-tech bubble.

The biggest clue on the direction of consumer health and spending, and therefore the economy, is the savings rate. While consumers had excess savings through Covid and were able to build up a buffer, the savings rate is now almost negative as people are eating into these buffers due to higher rates and prices.

“With these buffers almost gone, the real stress is now likely to show which will also reveal itself in falling cash flows for companies,” Birtle says.

This environment will be favourable for Australian stocks with defensive earnings, robust cash flows, strong balance sheets and cost control in sectors like Telcos, Healthcare, Insurance and Infrastructure.

“For some time, we had positioned our portfolios for the hard landing scenario. We have lowered the beta of our portfolios and are focused on companies that can grow earnings and dividends and have lower valuation risk,” notes Birtles.

“Medibank Private is a good example of this, with earnings stability and resilience from a superior industry position, light capital intensity and high cash flow resulting in consistently strong profit margins. We think that defensive inflation protection or stagflation protection is going to be quite important in a hard or soft landing scenario.

“Stocks like Telstra Group, an essential service, and Aurizon Holdings excel in that protection with very resilient volumes and good pricing power, and in the case of Aurizon, inflation-linked returns.

“Under a no-landing, stronger for longer growth theme with higher rates, exposures to insurance stocks such as QBE Insurance Group and Suncorp Group do offer positive leverage.

“In all scenarios we also want to own names such as Worley, which we think has a compelling exposure to the energy transition, with 80% of their new business now in sustainability-type work in resources.”

Reece adds “Importantly, our views are formed not just from crunching the numbers released by companies during reporting season but from real engagement with executives on the ground.

“Over the four-week reporting period, our investment team conducted more than 100 meetings with company management teams following the release of results, and this on-the-ground research has helped us to refine our investment views and outlook.

“In summary, we believe that now is the time for investors to evaluate the balance in their portfolios. It is important for investors to be discerning in their stock picking and focus on the companies which have pricing power, resilient volumes, and capacity to manage margins, while avoiding stocks with valuation risk.”

The post Australian companies’ analysis shows Australia edging closer to a hard landing appeared first on AdviserVoice.

Reece Birtles

Martin Currie Australia, part of Franklin Templeton, has released its recent outlook paper on what has shaped the Australian market in 2023 and provide fundamental insight into the Australian equities landscape for 2024.

Reece Birtles, Chief Investment Officer of Martin Currie says “Further resilience in employment may support soft landing thesis established in recent market action”.

He adds, “Forward price -to-earnings ratio (P/E) for Australia is much lower than for global markets”.

In terms of expectations on earnings and dividend growth, Birtle says “Unfortunately, the outlook for dividend growth is dominated by this poor earnings growth outlook, even though Australian company balance sheets are generally strong and payout ratios are modest versus history. As a result, being selective in stock picking for income and growth is as important as ever.

“We expect that higher-quality, more defensive businesses that have pricing power to pass through inflationary impacts into their revenue stream will be better placed to grow dividends in the current environment. We note that inflation-linked mechanisms can often take time to flow through to revenues, so we see that positive impacts of past inflation can benefit returns for some time after inflation does slow.”

Looking at the Australian market, Birtles notes it “remains attractively valued”.

“Compared to the rest of the world, our view is that consensus EPS forecasts for Australian stocks have already digested more of the economic slowing, while global (especially US) EPS forecasts remain at cycle highs. Given the economic outlook of slowing inflation and growth, and the prospect of rate cuts, we expect EPS to be under pressure everywhere in 2024.

“At the same time, the forward Price-to-Earnings (P/E) ratio for Australia is much lower than that for global markets. Therefore, we see better value in the more discounted Australian market. There appears to be a contradiction between the economic growth pessimism of falling bond yields and the optimism of rising equity market P/E ratios.”

Birtles adds, “Within the attractively valued Australian market, we continue to see a wide dispersion between Growth-and Value-style stocks. This valuation dispersion narrowed in 2021-2022 on higher rates, but since the peak rate narrative and excitement around AI kicked off in March 2023, the valuation dispersion has again widened.

“Our view is that the greater the valuation dispersion between typical value stocks and growth stocks, the greater the excess return opportunity for a disciplined valuation investment approach.”

Read the report.

The post 2024 Outlook: Will it be a hard, soft or no landing? appeared first on AdviserVoice.

Reece Birtles

As we approach the end of Australian company reporting season, the results have demonstrated resilience of company performance in the face of fears about inflation, rate rises and recession notes Martin Currie, an active equities investment manager, part of Franklin Templeton.

Reece Birtles, chief investment officer Martin Currie, says there are already some clear trends emerging.

“The dominant themes influencing company beats and misses have been pricing power, cost pressures, leverage to interest rates, COVID reopening and resilient but softening consumer and business demand. Broad market earnings growth expectations have been trimmed to zero for the year ahead emphasising the importance of focusing on resilience of earnings in a slowing economy and wide valuation dispersions across stocks,” says Birtles.

“There has been an overwhelming number of sales / revenue results in line with consensus expectations with an even balance of earnings / dividend surprises and disappointments.”

“Similarly with respect to guidance revisions, a generally benign outlook for sales / revenue offset by worsening costs indicative of the inflationary environment has led to a marginally negative skew for EPS guidance feeding through to strong resilience in dividend expectations.”

Birtles adds: “In fact, the key theme of results overall is the lack of volatility across the board, despite how it may feel. We have been looking for material evidence of the interest rate induced recession; however, the numbers simply don’t show that yet, notwithstanding management commentary pointing to some clouds on the horizon.

“The top issues cited by companies, in both results and guidance outlooks, are pricing strength and consumer / business demand. Management change and the benefits of post-COVID reopening have been frequently cited as positives while cost pressures, the impact of increasing interest rates and ongoing labour shortages are consistent negatives.

“There has been surprisingly little mention of supply-chain pressures and the energy crisis although there have been pockets of concern over the potential impact of government intervention.

“The cracks are more evident when looking across sectors with weaker first halves especially visible in Energy and Utilities feeding through to decreased market confidence in the second half outlook for earnings in these sectors. Lower quality stocks have also borne the brunt of negative earnings revisions, although an increasing number of mid-strength quality companies have generated negative EPS outlooks indicating a tougher profit cycle for some on the horizon.

“From a total market perspective, consensus EPS over the next twelve months is expected to hold steady, reflecting robust sales and revenue expectations but offset by increasing cost pressures. This points to an environment where stock selection will continue to dictate the total return outcome for portfolios more so than has been the case over the last decade,” says Birtles.

The post Reporting season shows resilience of company performance despite fears about inflation, rate rises and recession appeared first on AdviserVoice.

Ross Kent

Martin Currie Australia, the active equity specialist investment manager of Franklin Templeton Australia Limited (Franklin Templeton), has bolstered its distribution team with the appointment of Ross Kent as a Client Portfolio Manager.

Kent will work closely with the Australian investment team to represent Martin Currie’s suite of investment capabilities across the institutional and intermediary marketplace, in partnership with Franklin Templeton.

An experienced financial services executive, Kent joins Martin Currie Australia from Bridge Impact Capital where he was responsible for building commitment from co-investors to fund infrastructure projects. Prior to this, he was the Head of Strategic Relationships at MLC Asset Management (formerly NAB Asset Management) where he was responsible for relationship management across its ten largest clients. He has also worked with Dimensional Fund Advisors Australia, Alliance Bernstein Australia & NZ and AMP Group.

Reece Birtles, chief investment officer, Martin Currie Australia said: “Ross has an outstanding track record in building client relationships and has great knowledge of the Australian market.

“We are delighted to have him join the team to further consolidate our presence in Australia and position ourselves as a leading active equity specialist for institutional and intermediary clients. Ross’s experience makes him well-placed to support our efforts.”

Kent added: “I am really looking forward to working at Martin Currie, and a team that has established a long-standing commitment to excellence in Australian equity investing with sustainable values.”

The post Martin Currie Australia strengthens team appeared first on AdviserVoice.