Over the last 12 months, we have seen a continued shift away from the benign inflation and low interest rate environment which dominated investment markets for most of the last decade. While inflation appears to have peaked, it has proved more persistent than some first thought and central bankers have continued to lift cash rates in response.
As financial conditions have tightened, we have also seen pockets of instability in the financial system, most notably resulting in Credit Suisse’s forced merger with UBS in March, where governments and regulators moved quickly to prevent wider contagion in the banking sector.
Despite this, equity markets proved resilient, even in the face of potential risks around a global recession and credit market tightening. While the market and economic outlook is always uncertain, it is in these kinds of conditions that the benefits of active, fundamental investment management can come to the fore.
Value for the long term
Over the last two years, value investing has returned to favour and markets are again starting to place greater focus on investment fundamentals, rather than narratives– conditions which suit the active approach of our investment teams.
In particular, our Australian Equities team has performed exceptionally strongly and we believe our investment process – with the four quality filters of conservative debt, sound management, recurring earnings and quality of business at its core – will be increasingly important, as cash flow and capital allocation take precedence in a rising rate world.
For Barrow Hanley, manager of the Barrow Hanley Global Share Fund, a bottom-up focus on a company’s long-term prospects and fundamentals should also see it well positioned for what could be a longer value investing cycle. We have been offering Barrow Hanley’s Global Equities capability in Australia since 2020 and we were pleased to also launch the Barrow Hanley Emerging Markets Fund during the year. This fund aims to provide investors with long-term capital growth from investing in emerging market shares.
The impact of contractionary global monetary policy was particularly evident in credit and fixed income markets, which have grappled with tightening financial conditions over the past year.
In March, we saw credit spreads impacted by concerns over the strength of the global banking system and liquidity pressures emerge in financial markets. While these pressures have eased somewhat, the outlook for credit markets continues to be challenging.
Despite this, our Credit funds performed well over the year – focusing on quality, defensively positioning portfolios while retaining capacity to take advantage of opportunities as they arise in the year ahead.
Award-winning investment capability
We were excited to see the Perpetual Diversified Real Return Fund, managed by our Multi-Asset team, named category winner at both the Lonsec awards and, for the fourth year in a row, at the Zenith awards. This result is a testament to our Head of Multi-Asset, Michael O’Dea, and the Multi–Asset investment team and the outcomes they have been able to achieve for our clients.
More broadly, we were honoured that Perpetual Asset Management Australia was recognised as Fund Manager of the Year at both the Lonsec Fund Awards and, for the second consecutive year, at the Zenith Fund Awards.
These awards are wonderful recognition of the strong investment culture and outstanding capabilities we have been able to deliver to clients and maintain through many market cycles.
Lastly, you may have seen that Perpetual Limited acquired the Pendal Group earlier this year. This has brought together two investment management firms with a long and proud history of offering high-quality, active investment capabilities and delivering strong and consistent outcomes for clients.
In Australia, we are now home to more than 70 investment professionals and are managing over $60b in assets. We are also part of a truly global asset management group, with leading active investment capabilities across the world and more than $200b in assets under management*.
As these businesses come together, the focus for our investment teams will, as always, be on investing for the long term, on behalf of our clients. In the year ahead, we look forward to continuing to provide you with world class active investment management capabilities and solutions in the Australian market.
*As at 31/03/2023