Brisbane-based Hyperion Asset Management, a $15 billion money manager, has dramatically increased its exposure to traditional mining and industrial stocks. This strategic shift follows the firm’s most challenging period of underperformance in three decades, largely attributed to the recent sell-off in technology shares that saw all three of its portfolios lag the broader sharemarket. Hyperion Asset Management focuses on identifying and investing in companies with strong growth prospects across various sectors, managing substantial investment funds for its clients. The firm’s $1.6 billion Small Growth Companies Fund recently faced a downgrade to a bronze rating from Morningstar after underperforming its benchmark by 41 per cent in the year to March 31.
To stem the bleeding, Hyperion began adjusting its portfolios in February by halving its exposure to software companies in some funds, including reducing stakes in WiseTech Global and Xero, which were major detractors. The capital from these divestments has been strategically reallocated to the resources sector, a segment where Hyperion previously held minimal positions. Materials stocks now constitute over 20 per cent of Hyperion’s Australian Growth Companies Fund, a significant increase from less than 5 per cent in April. Notable additions to the large-cap fund include Rio Tinto and BHP, with the latter becoming the portfolio’s largest holding at 10 per cent by March’s end, alongside Capstone Copper and ALS.
Investment Director Jolon Knight explained the rationale, stating this growth cycle represents a “multi-layered, multi-decade structural theme.” He indicated that increased exposure to copper and materials provides access to AI physical infrastructure, complementing global holdings in hyperscalers and chip manufacturers. This rotation into miners, producing metals essential for AI infrastructure, aligns with Hyperion’s new view of an economy shifting towards AI and robotics, promising higher productivity and growth. Despite these changes, Hyperion’s returns were also impacted by specific underperforming individual investments, such as hearing devices giant Cochlear, which delivered a profit downgrade in late April, causing its share price to fall significantly. Hyperion, having cut its stake earlier, still held a substantial position and is assessing the nature of these downgrades.
