Following the sharp sell-off around Liberation Day, value stocks have materially outperformed across both global and Australian equity markets. Globally, the rally has been led by financials and healthcare, while in Australia materials have driven the shift. Given this strong performance, and consistent with our neutral asset allocation view between the growth and value styles, we elected to trim select deep value style managers. This ensures portfolio outcomes are not disproportionately driven by style at a time when we do not hold a high-conviction preference or see a clear catalyst for sustained outperformance of value over growth (or vice versa). The recent strength in value style funds provided an opportune window to rebalance portfolios toward a more neutral style position. Proceeds from the reductions were reallocated to style-neutral managers.
Following the strong performance of emerging markets and real assets, we took some profits and trimmed these exposures and reallocated capital to Australian and developed market equities. Portfolios had maintained a pronounced underweight to Australian equities relative to their strategic asset allocation, which contributed positively to performance amid recent domestic market weakness. We used this opportunity to move closer to a more neutral asset allocation position, while still retaining a modest underweight position. The overweight to emerging markets relative to developed markets has also delivered strong returns. Accordingly, we reduced this overweight (took profits) to a more moderate level, maintaining our constructive medium-term view while prudently rebalancing following outperformance. Real assets were similarly trimmed to a more balanced portfolio position, serving as a funding source for the increased allocations to Australian and developed market equities as the earnings outlook for companies becomes clearer.
Outlined below is a summary of how these changes were implemented within the Key Portfolio, together with an overview of the new managers introduced and the role each plays within the overall portfolio construction framework.
To reduce overall value style exposure, allocations to Barrow Hanley Global Share, L1 Capital Long Short and Pzena Emerging Markets Value were trimmed, with proceeds partially reallocated to the newly introduced style-neutral manager, Life Cycle Global Share.
To moderate the underweight to Australian and developed market equities, and reduce the overweight positions in emerging markets and real assets, allocations to Quay Global Real Estate and Pzena Emerging Markets Value were trimmed. The proceeds were redeployed into Life Cycle Global Share and Alphinity Australian Share, supporting a move toward more balanced regional and style positioning within the portfolio; Australian Eagle Trust was also moderately trimmed to balance the position sizing in the Australian equity sleeve.
The Alphinity Australian Share Fund is a long-only, actively managed Australian equities strategy that invests in a diversified portfolio of typically 35–55 large-capitalisation Australian companies and is designed to provide core, style-neutral exposure to Australian equities, with moderate tracking error. The strategy is grounded in the belief that sustained earnings upgrades are the primary driver of share price outperformance over the medium term, and that markets often under-react to early signals of improving earnings momentum.
The Fund is managed by Alphinity Investment Management, a specialist Australian equities boutique formed in 2010 and backed by Fidante Partners. The portfolio management team — led by Bruce Smith, Stéphane André, Andrew Martin and Stuart Welch — has worked together for more than 15 years and brings deep experience across market cycles. Alphinity is majority employee-owned, fostering a strong alignment of interests between investors and the investment team. Fidante provides operational, compliance and distribution support, allowing Alphinity to remain fully focused on investment research and portfolio construction.
Alphinity’s investment process blends rigorous fundamental research with a proprietary quantitative framework, the Composite Research Model (CRM), which systematically identifies companies experiencing positive earnings revisions, improving business momentum and valuation support. This disciplined approach helps the team focus on stocks where earnings leadership is strengthening but not yet fully reflected in market expectations. Portfolio construction emphasises diversification, risk control and consistency of outcomes, with active sector and stock exposures tightly monitored to avoid unintended style or factor biases. Through this repeatable, research-driven process, the Fund aims to deliver consistent alpha generation driven by stock selection skill rather than broad market or style exposures, while providing investors with reliable capital growth and income across market environments.
The Life Cycle Global Share Fund is a core-style global equity portfolio of 150-250 companies. which are selected using a distinctive and proven Corporate Life Cycle-inspired investment approach and combined into a concentrated portfolio with relatively balanced style characteristics where stock-picking success is the primary driver of relative returns.
Life Cycle Investment Partners is a London-based boutique investment manager established in 2024 by the same investment team that previously managed the same strategy at Royal London Asset Management. Life Cycle Investment Partners is majority employee-owned and supported by Pinnacle Investment Management Group, a leading Australian multi-affiliate asset manager based in Sydney. The investment team is headed up by senior portfolio managers Peter Rutter, Will Kenney, and James Clarke, each with over 20 years of experience successfully managing global equities and over a decade of working together. The three are joined by portfolio managers Chris Parr, Joseff Thomas, and Niko de Walden, all previously portfolio managers at Royal London, and one analyst.
The team’s investment philosophy is built on four principles:
1) business fundamentals are the most important driver of share prices over the long term;
2) different fundamentals matter at different stages of a company’s life cycle;
3) enduring inefficiencies cause temporary mispricing of these fundamentals; and
4) by taking advantage of its differentiated investment process, it is possible to identify and exploit these mispricings repeatedly.
A proven and rigorous investment process refined over 20 years is based on bottom-up, fundamental analysis but also utilises quantitative tools to prioritise research and assist with portfolio construction and risk management. Idea generation starts by putting 5,000 companies through a proprietary quantitative screen to filter out all low-quality companies and classify those remaining according to their position in the corporate life cycle — accelerating growth, compounding, slowing and maturing, mature and turnaround — and determine those companies with wealth creation potential. Stock selection involves using an in-house qualitative process to assess each company’s internal, external, and management factors. Detailed fundamental research and valuation analysis is conducted on the best companies to determine those suitable for inclusion in the portfolio.