Hedge Clippings |12 December 2025

12 Dec 2025 - FundMonitors.com

Given the recent uptick in inflation to 3.8%, this week's decision by the RBA to keep the cash rate steady at 3.60% surprised no one. It certainly didn't surprise two fund managers, Nick Chaplin from Seed, and Renny Ellis from Arculus...

12 Dec 2025 - Hedge Clippings |12 December 2025

By: FundMonitors.com

Hedge Clippings | 12 December 2025

Given the recent uptick in inflation to 3.8%, this week's decision by the RBA to keep the cash rate steady at 3.60% surprised no one. It certainly didn't surprise two fund managers, Nick Chaplin from Seed, and Renny Ellis from Arculus Funds Management, who regularly join us either for a preview of the RBA's decisions, or in this case, if not a post-mortem, then at least a review.

You can hear their comments in the video below, and neither held back from making the point that, in their opinion, the RBA had erred by cutting rates too quickly back in August, although neither attributed that decision to the pressure the board was under at the time from all quarters, including the media and Treasurer Jim Chalmers. However, they were both clear in pointing out that not only had they been of the view in August (and for some time before) that inflation hadn't been tamed, and that there was a high risk the board had acted too quickly, given the uncertainty around the data and particularly the effect of the various electricity rebates that were due to expire.

As Nick Chaplin pointed out, the benefit of hindsight is a wonderful thing, and no doubt the combined board would be wishing they had been more patient.

Looking forward, neither were prepared to categorically forecast a rate rise next year, certainly not at the RBA's next meeting due in February, but they also didn't rule the possibility out for later in the year... depending on the numbers.

Meanwhile, Tuesday's RBA decision, along with last week's inflation result, and yesterday's steady employment numbers, must have caused some red faces among the major banks' economic departments, even if they didn't admit to publicly misreading their collective crystal balls. As Nick pointed out, back in August, the CBA's economic forecast was for three more rate cuts this cycle.

Oops!

Maybe we have to accept that unless the economy dives, most likely as a result of unemployment moving up towards 5%, the RBA's inflation target range of 2-3% may either be optimistic, or a long way off.

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Performance Report: Seed Funds Management Financial Income Fund

12 Dec 2025 - FundMonitors.com

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AI fever hits bond markets - tactical play or a bigger bubble?

12 Dec 2025 - abrdn

In the world of AI, a lot can change in six months. Back in July, there was little talk of AI investment in public bond markets. (3-minute read)

12 Dec 2025 - AI fever hits bond markets - tactical play or a bigger bubble?

By: abrdn

AI fever hits bond markets - tactical play or a bigger bubble?

abrdn

December 2025

(3-minute read)

In the world of AI, a lot can change in six months. Back in July, there was little talk of AI investment in public bond markets. The sector's 'hyperscalers' (Amazon, Google, Meta, Microsoft and Oracle) had been funding their capital expenditure (capex) through strong free cash flow and by tapping private equity, private credit and other sources. This dynamic is changing - fast.

Capex is set to ramp up significantly over the next 24 months. With free cash flow constrained by shareholder returns and share buybacks, hyperscalers are leaning harder on public bond markets.

The last three months alone have seen a glut of debt issuance: $30 billion (bn) of bonds issued from Meta, $25bn from Alphabet (owner of Google), $20bn from Amazon, and $18bn from Oracle.

Major investment needed

The rapid growth of AI-optimised data centres highlights how much investment is needed for businesses to keep pace with the AI race.

Building an AI-specific data centre can cost up to $50bn - some three times more than a conventional facility, depending on the chips involved. Morgan Stanley estimates total data centre funding will hit $3 trillion (trn) by 2028, while JP Morgan and McKinsey put the figure at $5-7trn by 2030.

Oxford Economics suggests the current pace of AI investment since 2023 matches the digital boom in the 1990s, when the internet took flight.

With such major outlays required, capex guidance and forecasts are rising fast. The five hyperscalers are expected to grow capex by 40% in 2026 to $500bn, and by a further 17% to £600bn in 2027.

Powering the future

Increased energy demand is a major implication of AI and this too will require further investment and funding over time.

The International Energy Agency estimates that total data centre electricity consumption will double by 2030. Data centres are essential for AI due to the massive computational power and high-speed networking required to train and run complex AI models. Electricity consumption by AI-optimised servers is expected to increase fivefold by 2030.

BloombergNEF estimates that by 2035 global data centre power needs will hit 1.6TWh, which will take data centre share of global power demand from the current 1.3% to closer to 4.4%. Put another way, by 2030 it is estimated that if data centres were a country, they would be the fourth largest consumer of energy after China, the US and India.

This surge in energy demand adds another layer to the investment challenge - and will likely keep funding needs elevated for years to come.

Bond markets taking notice

Bond markets are sitting up. US investment grade credit spreads have widened by 12% since the end of September - driven in part by a surge in issuance, as markets question how the AI boom will be funded.

According to Morgan Stanley, just under half of the $3trn required by 2028 could come from cash generation, with a quarter from private credit and 10% from other sources, such as private equity and sovereign wealth.

That leaves the remaining 15% roughly $450bn - to be raised in bond markets, with $200bn-250bn potentially coming from investment-grade credit markets. JP Morgan estimates that 14% of the US investment grade debt market is already tied to AI.

In our view, AI-related corporate bond supply will likely continue to grow, both in absolute terms and as a share of the wider bond market. While AI issuance is unlikely to overwhelm the bond market, we do expect further periods of significant issuance from AI-related companies as they invest in their capabilities - potentially causing bouts of indigestion in public credit markets.

What does it mean for investors?

We see the technology sector as one to play tactically.

For strategies focused on shorter-dated bonds, the surge in supply creates opportunities to lock in high-quality names at more attractive levels as markets reprice.

For all-maturity or longer-dated funds, a nimbler approach is needed. This helps control exposure to the wider AI sector and leaves room to add when the next wave of major bond issuances arrives - which we expect in the not-too-distant future.

Final thoughts...

The AI revolution is well underway. The funding to power this new era will be significant. Bond markets are already taking notice as hyperscalers come to market. We expect this trend to continue at pace. Data centres alone will need an estimated $5-7tn by 2030.

For investors, this wall of supply offers opportunities to pick up attractively valued securities ahead of any repricing. Staying nimble and selective will be key as the next chapter of AI-driven growth unfolds.

Funds operated by this manager:

abrdn Sustainable Asian Opportunities Fund , abrdn Emerging Opportunities Fund , abrdn Sustainable International Equities Fund , abrdn Global Corporate Bond Fund (Class A)

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Infrastructure in focus: The industrial heartland

10 Dec 2025 - Magellan Asset Management

Looking at a country's industrial base can tell a lot about the makeup of its activities and its infrastructure needs. The chart below shows US industrial capacity from 2015 to now. (7-minute read)

10 Dec 2025 - Infrastructure in focus: The industrial heartland

By: Magellan Asset Management

Infrastructure in focus: The industrial heartland

Magellan Asset Management

November 2025

(7-minute read)

Looking at a country's industrial base can tell a lot about the makeup of its activities and its infrastructure needs. The chart below shows US industrial capacity, from 2015 to now. Several things stand out:

Electricity and gas utilities' capacity has grown significantly faster than overall industrial capacity, now ~20% higher than the total.
Growth in capacity in semiconductor and related sectors has been exponential, rising by ~45% in the last five years.
At the same time, total industrial capacity has expanded at a much more modest rate (up only 3% over 10 years), with manufacturing capacity even softer, near flat over the period.

With the expansion in electricity and gas utility capacity outpacing total industrial capacity while growth in semiconductor production capacity is on a tear, what we see here is the real-world story of the AI boom. Exuberance on AI has been the predominant theme for markets this year, and the chart below shows a structural shift in economic activity underway.

Highlights

This matters for infrastructure, as this dynamic is important to demand, and capex, for electricity and gas utilities going forward. AI demand and data centre growth drive projections for steep growth in power loads. Higher demand suggests substantially more capital investment to come for utilities.
One infrastructure sector that stands to benefit from this trend is regulated utilities. These companies do well from higher capex, as approved investment increases their rate base, on which they earn an agreed rate of return. We see this structural growth come through in robust capex plans and healthy EPS growth across the regulated US utilities in which we invest.
Importantly, these companies do not take the downside risk should the tide turn on AI. They can always pivot to other types of investment, including in renewable energy, or replacing ageing assets, to sustain capex and earnings. How industrial capacity progresses from here is therefore an important marker for utilities companies, and also the health of the AI trend.

By Magellan Global Listed Infrastructure Investment Team

Funds operated by this manager:

Magellan Global Fund (Open Class Units) ASX:MGOC , Magellan Infrastructure Fund , Magellan Global Opportunities Fund No.2 , Magellan Infrastructure Fund (Unhedged) , Magellan Global Fund (Hedged) , Magellan Core Infrastructure Fund , Magellan Global Opportunities Fund Active ETF (ASX:OPPT)

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 trading as Magellan Investment Partners ('Magellan Investment Partners') 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 Investment Partners financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellaninvestmentpartners.com

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 Investment Partners financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

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12 Dec 2025 - Hedge Clippings |12 December 2025

12 Dec 2025 - Performance Report: Seed Funds Management Financial Income Fund

12 Dec 2025 - Performance Report: Quay Global Real Estate Fund (Unhedged)

12 Dec 2025 - AI fever hits bond markets - tactical play or a bigger bubble?

Major investment needed

Powering the future

Bond markets taking notice

What does it mean for investors?

Final thoughts...

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10 Dec 2025 - Infrastructure in focus: The industrial heartland

Looking at a country's industrial base can tell a lot about the makeup of its activities and its infrastructure needs. The chart below shows US industrial capacity, from 2015 to now. Several things stand out:

Highlights

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