NEWS
2 Jun 2025 - The big issues for investors coming out of Washington
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The big issues for investors coming out of Washington Magellan Asset Management May 2025 |
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The first 100 days of the second Trump administration have certainly been interesting for investors. And as the initial global tariff shock appears to be winding back, it's a good time to draw on the thoughts and the insights of a Washington insider. National Security Expert Michael Allen, who was a Special Assistant to former President George W. Bush shares his thoughts in a wide-ranging interview. Magellan Head of Global Equities and Portfolio Manager Arvid Streimann talks with Michael about tariffs, the US government deficit, the Democrats, the US's technological lead over China and the Chinese military buildup. |
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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: Copyright 2025 All rights reserved. Units in the funds referred to in this podcast are issued by Magellan Asset Management Limited ABN 31 120 593 946, AFS Licence No. 304 301 ('Magellan'). This material has been delivered to you by 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. The opinions expressed in this material are as of the date of publication and are subject to change. The information and opinions contained in this material are not guaranteed as to accuracy or completeness. 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 and no guarantee is made that any forecasts or predictions made will materialise. 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. 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. Further important information regarding this podcast can be found on the Insights page on our website, www.magellangroup.com.au. |
30 May 2025 - Hedge Clippings | 30 May 2025
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Hedge Clippings | 30 May 2025
News | Insights Trip Insights: Asia | 4D Infrastructure 10k Words | Equitable Investors April 2025 Performance News TAMIM Fund: Global High Conviction Unit Class DAFM Digital Income Fund (Digital Income Class) Insync Global Quality Equity Fund |
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30 May 2025 - Performance Report: ASCF High Yield Fund
[Current Manager Report if available]
30 May 2025 - A Super Strategy
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A Super Strategy Marcus Today May 2025 |
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Every time there is a significant market event I have friends ask me the same set of questions. Why is this happening? Is it too late to sell? I don't have any shares, should I care? The more important question is - how could I have avoided this? Better still - think the stock market doesn't affect you? Think again. Foreword: In my friendship group there are two types of people. 10% are interested in the stock market. Know what an ETF is and buy and sell shares. The other 90% have never traded in their life, think a bear market is where you can buy a bear and don't really understand what I do at Marcus Today. Should that group be interested in the stock market? If they are 30 years old they will on average have $50,000 in their superannuation account. Where is that money invested? In the stock market! The performance of their super and the amount they will retire with are highly dependent on it. This article is focused on them. PART 1: SHOULD YOU CARE? Working in the stock market, the only time I get asked for advice from friends is when there's a major correction. The same question always comes up: "Is it too late to sell?". It happened last month (tariff tumble), it happened last year (carry trade three day flush) and would have happened in Covid. When you can see an account with thousands of dollars dropping 5% in a day, this question isn't surprising. The question no one asks (but should): "How could I have avoided this?" Even more important: "What difference would it make to my retirement by asking that question?".
I know most people under 35 struggle to look far ahead enough to care. When half of my friends are wondering how they will be able to afford a house or start a family, you can forgive them for not paying much attention to something that automatically gets taken out of their payslip and can't be touched for another 30 years. The purpose of this article is to say "you 100% should care". Given the fabulous opportunity my generation has from super - tax benefits, long runway, the eighth wonder of the world (compounding interest), considering we 'missed' the housing market boom, it is worth investigating the full potential of what your balance could be upon retirement. I used to be an engineer, so let's do a few simple calculations and see what difference each % return makes over the course of a work life. To simplify the formula, I've made the following (conservative) assumptions:
The chart below shows the final super balance you can expect after year 35 with an 8% return. Both the S&P 500 total return index and All Ords Accumulation index average 9-11% (over 30Y) but you have management and administration fees to include. That aside:
One percent makes a huge impact in other words when your runway is 35 years, and again, this is a conservative estimate.
The good news is even with 8% average return you'll be retiring with ~$3.5 million. You can see why the government has been steadily trying to increase the mandatory super contribution (goes from 11.5% to 12% in July). If every Australian had the above hypothetical work life there would be no need for the pension. Last FY it accounted for 37% of all government spending. Assuming an inflation rate of 2.5% (the average in Australia for the last 10Y), this $3.5 million equates to a present value of $1.45 million. Not bad. Marcus once estimated how much you really need to retire was around $2 million. Time to ask for that promotion! Sounds OK, BUT. There are two catches. This calculation assumes 100% of your super is invested in either the S&P 500 total return or the All Ords Accumulation index. Something most super companies will call 'high risk' and try talk you out of. The average 'balanced' Australian superannuation account only has 35% invested in international equities and 30% in Australian equities. The rest is private equity, infrastructure, property, fixed interest and (dare I say it) cash. If you're in a balanced super account your return could shrink from ~8% to ~6% ('defensive' drops it to 5%!), and that $1.45 million retirement fund falls to $0.9 million. Probably enough to live on. But not enough for the European holiday, grand-children school fees or kitchen renovation. In short:
To combat this you need to switch to a 100% equities investment strategy. Check your current provider allows this. If not. Time to move. The second catch...tax. Cannot be ignored but I'll try keep it simple. All contributions to super (below the $30k pa concessional cap) are taxed at 15%. All realised investment gains are taxed at 15% (I'm not assuming shares will be held for longer than 12 months, so no 50% CGT concessions). All in all, this is far better than paying at your marginal rate but is still significant. Factoring in these rates, your $0.9 million in a balanced fund drops to just $670k. PART 2: THE ROCKET $670k doesn't sound like much, so now we ask - can you do better? The next chart shows the final super balance you can expect after year 35 for four different returns ranging from 8% to 14%. At 14% the balance jumps from $3.5 million to $15 million or from $1.4 million to $6.2 million in today's terms. At 18% the line would look like a rocket.
Accounting for the tax rates above these are the final balances and net present value for returns ranging from 8% to 14%.
And the difference one percent makes now?
Why does all this matter? Is 14% possible? The Marcus Today Strategy Portfolio has returned ~20% since inception in 2018. We can't guarantee future returns will match past returns of course but even taking 12% - your retirement super level will go from $2.3 million to $5.2 million ($2.2 million present value) and that's not even touching on voluntary contributions. All hypothetical of course. No one knows the future but if you had the opportunity to increase your returns why not take it?
CONCLUSION Three things for you to do:
Bonus: If you want to become a better self-guided investor. Read Market Strategy a few times a week. We call it learning by osmosis. Oliver Matthew - Senior Analyst & Editor |
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Funds operated by this manager: |
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29 May 2025 - Performance Report: Equitable Investors Dragonfly Fund
[Current Manager Report if available]
29 May 2025 - What Trump's trade war means for EM local currency bonds
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What Trump's trade war means for EM local currency bonds abrdn May 2025 With index total returns of 3.3% in April and 7.7% year-to-date [1], emerging market (EM) local currency (LC) bonds have been resilient in the face of Trump's tariff shock. This is especially when compared to equities, with the S&P 500 Index at one point down by as much as 18% during April. What explains the outperformance of EM LC bonds, and to what extent might this be sustained? Local EM bond impactLocal currency bond returns include local bond returns and local currency (FX) returns. Country bond yields tend to move lower (bond prices rise) whenever local growth and inflation decline, making local interest rate cuts more likely. Trump's tariffs seem to tick both boxes - global growth, including in EM countries, is expected to weaken while non-US inflation is set to decline as Chinese goods formerly destined for the US are sold elsewhere at lower prices. The recent drop in oil prices due to global growth worries is also disinflationary. Local EM currency impactThe impact of sharply increased US tariffs on EM local currencies is less straightforward. Before Trump was re-elected, markets expected that US policy changes would likely be dollar-positive. The thinking was that increased tariffs would narrow the US trade deficit, while Trump's pro-growth policies would put upward pressure on US interest rates, supporting the US dollar. However, the tariff saga has significantly weakened the US dollar, which fell nearly 5% versus the euro in April. Conversely, as shown in Chart 1, the effect on EM local currencies has been favourable.
Chart 1: Selected year-to-date EM local currency performance versus USD (% change) The main reason for the US dollar's weakness is that while higher US tariffs were widely anticipated, the extent of the hikes and the disorderly manner of their implementation took most by surprise. With input costs expected to soar, the inflationary impact will likely be greater. The US growth outlook has also weakened significantly, with a recession now a possibility. Why recent USD weakness could persistAmid growing concerns about stagflation and generally increased US policy and economic uncertainty, US equities have especially borne the brunt of the tariff fallout. While this reflects increased domestic selling, we think a major contributor will also have been selling on the part of foreign investors. Over many years, helped by the 'US exceptionalism' narrative, foreign investors have built up very large holdings of US assets, which has certainly helped the dollar. Going forward however, if policy concerns persist, foreign investors could further reduce their still-large US asset overweight and effective long dollar positions. The fact that US equities and the dollar remain historically overvalued on most measures may also be a consideration. Reducing foreign allocation to US assets, or even slowing their accumulation, would likely be negative for the dollar but positive for non-dollar assets, including EM LC bonds. Some caveats for the weak USD caseThere are caveats. Predicting currency moves with any great conviction is always difficult, and betting big against the US dollar hasn't worked for well over a decade. There are also multiple scenarios in which the US dollar could bounce back strongly. For example, recent deals, including the newly announced temporary agreement with China, suggest that 'reciprocal' tariffs may eventually end up off the table, with the baseline 10% rate and some sectoral tariffs remaining. While this would increase costs for US consumers, it may well not be enough to trigger a disruptive recession, fear of which was surely behind some of the dollar's weakness this year. Outlook is about much more than just the dollarEM LC bond returns depend on more than what happens to the US dollar. With an index yield of over 6%, the income contribution will be sizeable [1].Furthermore, country-specific factors will continue be a key performance differentiator, highlighting the need for selectivity. Even with higher US tariffs, country-level impact could vary considerably. For example, if some form of tariff reciprocity were retained, sizeable variations in US tariff differentials between countries could emerge, creating potential US trade winners and losers. Putting everything togetherWe think the Trump tariff shock strengthens the investment case for EM LC bonds. Weakening global growth and falling inflation outside the US should make EM local interest rate cuts more likely, boosting EM local bond returns. On the currency side, foreign investor may look to further diversify their sizeable US asset holdings, especially US equities, in the face of heightened policy uncertainty. This could support EM local currency returns. However, several caveats argue against adopting a high-conviction view on US dollar directionality.
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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 |
28 May 2025 - Performance Report: TAMIM Fund: Global High Conviction Unit Class
[Current Manager Report if available]
28 May 2025 - 10k Words | May 2025
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10k Words Equitable Investors May 2025 Apparently, Confucius did not say "One Picture is Worth Ten Thousand Words" after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars... Private company M&A valuations have converged with those of ASX-listed emerging companies; a structural shift evident in 52-week highs and lows on the ASX sees gains going to a select group, with CBA being one of the few as lacklustre EPS growth is rewarded with P/E multiple expansion and CBA almost singlehandedly holds up MSCI's Australian index. Overall, EPS estimates for Austalian equities have also been lacklustre but, thanks in part to CBA, the Australian P/E is sitting at elevated levels also seen during the COVID-19 epidemic and the dotcom boom. Meanwhile, there was little market conviction in a 50 basis point cut from the RBA in May (which turned out to be the correct positioning with a 25bp cut announced today). IPO markets remain notably weak in 2025. On the tariff front, US price hikes from goods originating in China were quickly evident relative to those originating elsewhere. EBITDA multiples of unlisted Australian mid-market trades (Nexia MM Index) v. ASX trading multiples 
Source: Nexia No. of Australian M&A mid-market transactions and disclosed EBITDA multiple average value by enterprise value (March quarter 2025) 
Source: Nexia S&P/ASX 300 and cumulative 52-week highs - 52-week lows 
Source: SG Hiscock Forecast EPS (next 12m) and forward P/E multiple of Commonwealth Bank of Australia (CBA) 
Source: TIKR CBA contribution to 12-month return on iShares MSCI Australia (EWA)
Source: Koyfin Australia MSCI forward earnings per share (analysts' average forecasts) 
Source: Yardeni Research Australia MSCI forward PE multiple 
Source: Yardeni Research Expectations for a 50 basis point cash rate cut by the RBA in May were just 51% prior to the decision 
Source: ASX Decline in IPOs year-on-year globally in CY2025-to-date 
Source: WSJ, LSEG 2025 Australian IPO tracker
Source: Smallcaps.com.au US consumer price indices by country of origin 
Source: "Tracking the Short-Run Price of US Tariffs," Cavallo et al, May 10, 2025 US retail price indices in affected and unaffected categories 
Source: "Tracking the Short-Run Price of US Tariffs," Cavallo et al, May 10, 2025 May 2025 Edition Funds operated by this manager: Equitable Investors Dragonfly Fund Disclaimer Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI. |
27 May 2025 - Performance Report: DAFM Digital Income Fund (Digital Income Class)
[Current Manager Report if available]
