NEWS
12 Mar 2025 - Performance Report: Airlie Australian Share Fund
[Current Manager Report if available]
12 Mar 2025 - Performance Report: Bennelong Concentrated Australian Equities Fund
[Current Manager Report if available]
12 Mar 2025 - Fun and games in macro markets
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Fun and games in macro markets abrdn February 2025 If you were to judge the year so far by absolute yield moves, 2025 would seem quite a sedate affair. In bond markets, we're roughly where we started in terms of yields. However, scratch beneath the surface and you'll find a whole lot of headline-driven volatility. As expected, the Bank of England (BoE) and European Central Bank (ECB) cut base rates this year, while the US Federal Reserve (Fed) stayed on hold. No prizes for getting that right. But congratulations if you also had a 12-hour UK gilt mini-crisis and then an A.I.-led risk-off rally on your 2025 bingo card. One man has been playing all the cards: US President Donald Trump. He's back to what he does best - driving the narrative. In a blizzard of executive orders, policy hints, and off-the-cuff comments, Trump has covered an array of topics in just a few weeks. The two subjects that have markets most captivated? Tariffs and Ukraine. Tariffs started off slow with Colombia in the firing line, before Mexico and Canada came hurtling into view. After giving the US's closest trading partners a one-month stay of execution, Trump moved onto a sector-specific approach targeting aluminium and steel. We've since moved onto 'reciprocal tariffs' but will have to wait until April to learn the rules of that particular Trump tariff game. What is clear is that Trump hasn't changed from his first term. He likes to play games with his rivals. However, what's less clear is how Trump solves his own US economic puzzle. It won't be easy. US - Rubik's CubeTrump's economic strategy is a lot like a Rubik's Cube. The goal of the Hungarian 3D puzzle is to align all the blocks so that each side shows the same colour. The tricky part is that each layer turns independently, so focusing on one side can throw the others out of whack. Trump's goal is to 'Make America Great Again' and oversee a thriving US economy as he heads into the 2026 mid-term elections. To achieve this, inflation needs to be under control. This was the key problem for President Biden, who saw US growth and job creation accelerate but prices outpace wages. Inflation peaked at 9.1% in the summer of 2022. Trump has two years to make the average American feel richer. Back to the Rubik's Cube. To prioritise American jobs for American people, Trump is applying tariffs and slashing immigration. That's one side of his policy cube looking complete. However, these polices, combined with mooted tax cuts, are potentially inflationary - pushing the other side of the cube out of line. Price pressures are not like they were during Trump's first term. The most recent Consumer Price Index read 3% year on year, and consumers still feel the pinch of much higher price levels. It wouldn't take much for inflation to move back into uncomfortable territory. The prospect of rate hikes would move yet another side of the Trump Rubik's Cube in the wrong direction. Keeping inflation in check is possible. Trump wants to pursue lower energy prices and, with Elon Musk's help, drastically cut government spending. But again, how will aggressive government spending cuts affect the growth side of the cube? We'll watch the data with interest. On the tariff front, we should hear what 'reciprocal tariffs' look like at the start of April. On tax cuts, we await more details and substance. Research shows that any Rubik's Cube can be solved in 20 moves. We think it will take a lot more than this to complete Trump's economic puzzle. US yields have the potential to head higher as a result. UK - dodging snakes and climbing laddersThe UK faces a game of snakes and ladders. The ultimate prize is lower interest rates. The BoE cut rates in February with the message of 'gradual and careful'. Inflation is likely to move higher in 2025, but the BoE seems comfortable with its long-term forecasts. The Bank believes any near-term rise in inflation will be temporary and that it can continue to cut base rates. The BoE's first possible ladder up the board is the continued loosening of the labour market. Most indicators show the jobs markets rapidly cooling. This will embolden the BoE to speed up rate cuts when this feeds through to the official wage data. A smaller ladder comes in March: we might see more aggressive government spending cuts if the Office of Budget Responsibility review shows Chancellor Reeves is close to breaking her own fiscal rules. Reduced government outlays would likely to inhibit growth and increase the probability of cuts. The largest, fiercest snake is inflation. Increases to the national living wage and national insurance contributions kick in from April. There's a risk many firms will pass these costs onto consumers. The BoE expects only a modest price increase as a result, yet there's still scope for an inflationary surprise. The way these policy changes feed through to the real world will determine how quickly the BoE can get to the top of the snakes and ladders board. Our view for some time has been that the BoE gets there quicker than the market expects. We think labour market weakening will outweigh the risk of inflation. We are, as a result, happy to remain long gilts. Europe - GAAAAAMBLE?!Europe, and Germany in particular, face a classic gameshow dilemma: stick with what they've won or gamble for the star prize and risk walking away with nothing? Cue the slick gameshow host turning to the crowd for advice. In Europe, the answer is gaaaamble. Former ECB Chairman Mario Draghi's recent report argued for further European investment. French President Macron said that Europe cannot remain herbivores (see our last article Fixed income: Eat meat or die...). As we write, the new Trump administration is making it abundantly clear that Europe needs to step up, particularly in defence spending. The German election might offer the opportunity for one of Europe's core economies to reset its relationship with borrowing. This would have far reaching implications for the Eurozone's future direction. From an investment perspective, we think it's inevitable that Europe will start spending, despite the previous efforts at fiscal restraint. Leading figures in the European establishment have even called for some relaxation of fiscal rules via exceptions for defence spending. This will be uncomfortable for the likes of Italy and France with their high debt-to-GDP ratios. For Germany, this could mean a new government revisiting the 'debt brake'. The ECB might prefer that Europe plays it safe. With an unclear outlook and a challenging balance between growth and inflation, the ECB is noticeably hesitant. It may well signal a slowing of rate cuts. For these reasons, we think European yields can head higher, with a bias for the yield curve to steepen. Playing the game in today's marketsMarkets are so far brushing off the policy noise. We'll need details before yields start to move in either direction on a sustained basis. For now, we expect key participants to continue playing without fully revealing their hand. In this environment, investors can see the value in actively managed funds. Making the most of short-term mispricing and careful position management offers plenty of opportunities for the nimble active investment manager. Like all games: you have to be in it to potentially win it. |
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Funds operated by this manager: abrdn Sustainable Asian Opportunities Fund, abrdn Emerging Opportunities Fund, abrdn Global Corporate Bond Fund (Class A), abrdn International Equity Fund, abrdn Multi-Asset Income Fund, abrdn Multi-Asset Real Return Fund, abrdn Sustainable International Equities Fund |
11 Mar 2025 - Performance Report: 4D Global Infrastructure Fund (Unhedged)
[Current Manager Report if available]
11 Mar 2025 - Performance Report: Bennelong Australian Equities Fund
[Current Manager Report if available]
11 Mar 2025 - Performance Report: ECCM Systematic Trend Fund
[Current Manager Report if available]
11 Mar 2025 - DeepSeek R-1: A Game-Changer?
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DeepSeek R-1: A Game-Changer? Insync Fund Managers February 2025 Relatively unknown Chinese Quant Fund Manager - High Flyer Capital Management's chatbot, DeepSeek, has shaken the AI industry with its new reasoning model, R-1. This open-source breakthrough delivers ChatGPT-level performance at a purported 90% lower cost, using far fewer and less powerful GPUs. The Impact: A fundamental shift in AI economics--lowering costs, reducing hardware dependency, and making AI more accessible to new entrants. Investors took note, with at one stage $1.2 trillion wiped off U.S. markets, led by Nvidia's sharp decline. Why This Matters: Historically, AI has been dominated by capital-intensive models requiring massive computational power. DeepSeek's efficiency-driven approach challenges this, showing that AI can be developed at a lower cost and lower energy consumption. This opens the market to smaller players, accelerates innovation, and could curb the dominance of AI giants like OpenAI, Google, and Meta. Three large investment implications arise; Big Tech's AI Moat Narrows. Open-source models threaten pricing power and market dominance. AI Costs Plummet & Adoption Accelerates. Expect new applications and broader AI integration. Capex Strategy Shift. Firms like Meta and Microsoft will likely double down on efficiency, and may scale back on AI investments. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
10 Mar 2025 - Performance Report: Seed Funds Management Hybrid Income Fund
[Current Manager Report if available]
10 Mar 2025 - Investing in Technology
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Investing in Technology Magellan Asset Management February 2025 |
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The technology sector is home to many dominant and well-known companies such as Apple, Google (Alphabet), Microsoft, ASML, Nvidia, Tesla, Meta, and SAP. Renowned for its innovation, this sector continually develops new products and services, driving digitalisation and enhancing productivity for consumers, companies and industries. Today, technology is indispensable not only to our daily lives but also to the operation of nearly every other industry, such as healthcare, transportation and finance. As the global population grows, digitalisation increases and artificial intelligence use cases proliferate, the demand for technology products and services is anticipated to continue rising. Why invest in technology?Investing in technology companies can offer significant growth potential due to the sector's constant innovation and development. Tech companies are at the forefront of creating new products and services that transform industries and improve everyday life. This continuous innovation can drive substantial revenue growth but comes with higher risk given the outsized opportunity. Finding quality technology companies requires thorough research to understand the financial fundamentals, competitive landscape and overall business strength. Technology - Continuous innovationThe technology sector covers a wide range of companies and industries, including software, hardware, semiconductors and platforms. Identifying and understanding the unique attributes of each company, such as their innovation capabilities and market position are critical when determining whether the company can generate sustainable and attractive returns over the long term. This is key to making informed decisions and capitalising on the dynamic growth opportunities within the higher-risk technology industry. Not all companies and industries in this sector meet the requirements to be included in Magellan's quality investment universe. Extensive research is undertaken to identify the unique attributes of a company that we believe enable it to generate sustainable attractive returns over the longer-term. Some of these industries in the Magellan universe include: Consumer platforms
With the emergence of artificial intelligence, machine learning, and cloud computing, consumer platform companies are leveraging new technology to enhance their offerings and user experiences. These innovations can create new market opportunities and revenue streams. Importantly, innovative incumbent platforms have a data advantage, whereby they can improve functionality and personalisation, increasing switching costs and barriers for new entrants. Netflix, the leader in subscription-based streaming, exemplifies a high-quality consumer platform company. The platform offers a wide variety of content, including TV series, movies, documentaries and live sports. As the largest global streaming service, Netflix has a scale advantage, providing content to millions of paid subscribers in over 190 countries. Software
These companies often benefit from high client retention and recurring revenue models, such as software subscriptions and enterprise licensing agreements. The swift pace of innovation, increased data analytics and the growing use of digital solutions in business operations drive continuous demand for new and improved software products. This ongoing demand is a key driver of innovation, pushing companies to develop cutting-edge solutions that enhance business efficiency and productivity. Artificial intelligence and cloud computing have empowered software companies to enhance their offerings, providing more sophisticated and scalable solutions. This enables companies to deliver advanced analytics, automation and personalised user experiences. SAP is a leading global provider of enterprise application software designed to streamline business processes. With over 400,000 customers in more than 180 countries, SAP has established a robust network of partners, developers and clients. The deep integration of SAP systems into company operations makes switching both time-consuming and costly, giving SAP a significant competitive advantage. Semiconductors
Semiconductors drive innovation across multiple industries by enabling the creation of faster, smaller and more efficient electronic devices. Semiconductors are fundamental to the development of emerging technologies such as artificial intelligence. Investing in semiconductors offers significant growth potential, as the demand for advanced electronic components continues to rise with the increasing digitalisation of our world. ASML is a Dutch multinational corporation founded in 1984. It specialises in the development and manufacturing of photolithography machines used to produce semiconductors. ASML has a global customer base and is the sole supplier of extreme ultraviolet lithography machines, which are crucial for producing the most advanced microchips. This unique position provides ASML with a significant competitive advantage. What are the risks?When investing in the technology sector, understanding a company's competitive environment, innovation pipeline and management's strategic vision is important and can in turn help navigate any risks identified. Forecastability: There is often a wider range of outcomes for these businesses given the higher-growth and higher-risk operating environments. As a result, they are more prone to price fluctuations. Regulatory challenges: Data privacy, cybersecurity and antitrust issues are some of the evolving regulations to which this sector is exposed. These companies need to ensure compliance; failure to do so can result in financial and reputational impacts. Technology: With the rapid evolution in technology, there are risks to incumbents that do not continue to innovate and strengthen their products and services. M&A risks: Technology companies are typically highly acquisitive, buying technology or capabilities to retain leading edge. Large M&As present risks to shareholders from capital allocation and integration perspectives. Market volatility: These companies are not immune to market volatility and can experience price fluctuations due to changes in market sentiment, technology advancements and market competition.
How do technology companies fit into a portfolio?The technology sector can play a pivotal role in a diversified investment portfolio due to its potential for high growth. Given the rapid advancement in technology and industry investment, it is critical to actively monitor companies for risks and opportunities.
There are thousands of companies listed on world exchanges. However, at Magellan we regard our eligible universe of potential investments to be only about 200 companies. These are the companies we believe to be of sufficient quality to consider for investment, companies in which we have a high degree of certainty in their ability to protect and grow earnings Sources: Company filings. |
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Funds operated by this manager: Magellan Global Fund (Hedged), Magellan Core Infrastructure Fund, Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged) Important Information: Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au. Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements. This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material. Any third party trademarks contained herein are the property of their respective owners and Magellan claims no ownership in, nor any affiliation with, such trademarks. Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan. |
Consumer platform companies develop applications and platforms ranging from entertainment to social media and e-commerce solutions directly catering to users. These companies often experience high user engagement and employ recurring revenue models, such as subscriptions and in-app purchases. The rapid pace of technological advancement has led to increased demand and reliance on digital solutions in our everyday lives. This ongoing demand is a key driver of innovation, prompting companies to continually enhance the capabilities and appeal of consumer platforms.
Software companies develop applications and platforms for consumers and companies, ranging from enterprise resource planning systems to customer relationship management tools, productivity software and project management software.
Semiconductors are essential components used in data centres, smartphones, computers, medical equipment, and cars. Companies in the semiconductor industry are involved in the design, manufacturing and distribution of semiconductor chips and related technologies. This industry is crucial for the development and functioning of modern electronics, enabling advancements in computing power and energy efficiency.
7 Mar 2025 - Hedge Clippings | 07 March 2025
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Hedge Clippings | 07 March 2025 Firstly, a correction: Last week's Hedge Clippings, where we likened Donald Trump and Elon Musk to Lewis Carroll's twins, Tweedle Dum and Tweedle Dee, was half on the mark, and half off it. Seemingly no sooner had we made the connection, than what had been a planned photo/PR opportunity in the Oval Office with Ukraine's Volodymyr Zelenskyy degenerated into a now infamous example of global diplomacy, Donald style. Very Tweedle Dum, although not that dumb, as it now appears that Zelenskyy is now going back for more - or at least more munitions - even without security guarantees - which given they would be up to Putin to honor, might not be worth much anyway. As Tweedle Donald said, "You don't have the cards". Where we were off the mark was putting Musk in the Tweedle Dee role. JD Vance stole that part - and spectacularly. For those not looking forward to the remainder of Trump's Term 2 as POTUS, watch out when, or if, Vance takes over, either in four years' time, or possibly before that if Trump doesn't make it. Turning to the local news, this week saw a glimmer of hope for Albo's re-election chances in the form of an uptick in Australia's GDP figures, rising 0.6% in the December quarter, its highest level since December 2022, and 1.3% over the year. Slightly less encouraging were the GDP per capita figures, which only rose 0.1%, an improvement at least, but still in negative territory at -0.7% for the year. Finally, an interesting speech by the RBA's Andrew Hauser who as we've mentioned before manages to upend the traditional view of a central banker by being both smart (generally a pre-requisite for the job) and entertaining at the same time. Hauser explained and expounded the VACU view of the world - Volatile, Uncertain, Complex, and Ambiguous. Hauser was talking about a general approach, but he might also have been describing the first six weeks of Tweedle Donald's second term. In fact, he was explaining the difficulty the RBA has in getting its monetary policy settings right, which in the past had focused on treading the "narrow path" as Philip Lowe used to put it. He rightly explained that the RBA, having put rates up more slowly, and less than the rest of the world, it was only correct that they had started the easing cycle behind the others as well. In his and his colleagues' eyes they have achieved what has been asked of them - trimmed mean inflation averaged over the past six months back in their preferred 2-3% range, and with employee participation in the workforce at 64.5% - a record level. Congratulations? Maybe, but then of course his words of caution: "Central bankers are paid to worry, not celebrate" particularly given the VACU world in which we live. Number one worry is global trade policy - Volatile, Uncertain, Complex and Ambiguous - courtesy of Tweedle Donald, although Hauser was too polite to put it that way, as he cautioned that maybe markets weren't fully factoring the uncertain risks ahead. Number two risk on Hauser's agenda was the level of spare capacity in Australia's strong labour market, and the potential for inflation to head upwards again if the current low (record) unemployment level falls further as economic activity picks up. This is where the RBA's crystal ball falls into the Uncertain, Complex and Ambiguous categories - and possibly all three at the same time. So welcome to the new normal of VACU - into which we'll add another U - the uncertainty of the soon to be announced election. News & Insights Manager Insights | East Coast Capital Management 2024 Responsible Investment and Stewardship Report | 4D Infrastructure 10k Words | February 2025 | Equitable Investors January 2025 Performance News Equitable Investors Dragonfly Fund
February 2025 Performance News |
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