Nathan Hughes, a portfolio manager in Perpetual’s Australian equities team, which oversees approximately $12 billion in assets, has outlined the fund’s strategic approach amid current market conditions. Operating with an absolute-return mindset, the fund maintained a significant cash and fixed interest allocation, cautious of modest return prospects from many large index-heavy companies. However, recent market volatility, particularly multiple compressions in healthcare and software, now presents compelling opportunities that the fund is selectively addressing, marking a shift to deploy capital.
Despite recent market lag, primarily impacted by global gaming stock Flutter due to the rise of prediction markets and a subsequent multiple de-rating from increased investment requirements, the fund’s performance has shown recent improvement. This resurgence has been led by key holdings including Soul Patts, coal miner New Hope Corporation, and AMP. Hughes emphasised that the fund’s current holdings significantly diverge from what he considers a relatively unattractive and concentrated benchmark index, underscoring a bespoke investment strategy.
Perpetual recently exited its position in mining giant Glencore, citing a finely balanced risk-reward trade-off after strong performance in commodity exposures like copper. A lesser-known holding is Navigator Global Investments, a company owning various interests in alternative asset managers with diverse strategies. Navigator’s recent acquisitions expand its portfolio, contributing uncorrelated earnings and offering latent balance sheet capacity for further expansion. Hughes also identified Ramsay Health Care as presenting compelling upside; negatives like labour inflation and private health insurance rebate changes are now well understood. Post-Ramsay Santé demerger, the focus on the core Australian business offers significant opportunity for improved operating performance and asset productivity. Potential for further capital repatriation, coupled with Ramsay’s substantial surplus franking credits, could also provide considerable financial flexibility.
