Following our successful third annual Manager Walking Tour in Melbourne on October 16, we wanted to share the key takeaways from the day's presentations for clients who couldn't join us. The event brought together leading fund managers to discuss current market dynamics and investment opportunities across asset classes.

The Macro Picture: A Tale of Disconnection

Tim Toohey from Yarra Capital Management delivered a compelling analysis highlighting the growing disconnect between weakening global economic indicators and continued market optimism. His key observation centred on the divergence between equity markets reaching new highs while economic data, particularly in the U.S., shows concerning cracks.

Toohey posed the critical question: are we in early 1998 or late 1999? The implication being whether the reckoning is months or years away. While early corporate earnings appear strong, forward guidance from major players including Jamie Dimon (CEO of JPMorgan Chase) suggests emerging headwinds that markets appear to be dismissing. Notably, the bond market may be starting to price in economic weakness that equity markets haven't yet acknowledged.

China: A Differentiated Opportunity

Tassos Stassopoulos from Trinetra presented a refreshingly different perspective on China, emphasising genuine portfolio diversification opportunities. His research reveals an increasingly inward-focused Chinese economy, where domestic consumption patterns are evolving independently of Western influence.

The technological adoption in tier 3 and 4 Chinese cities far exceeds developed markets, with widespread use of AI and robotics. Crucially, Chinese consumers no longer view domestic products as inferior to Western alternatives - a fundamental shift in consumption patterns. This presents a compelling differentiation opportunity for portfolios concerned about U.S. market concentration.

Finding Value Beyond the Magnificent Seven

Qian Ma from Munro Partners made a strong case for global mid-caps, an area showing attractive relative valuations compared to large-cap growth stocks. While these hyper-growth companies carry inherent volatility, their valuations aren't as stretched as their large-cap counterparts, despite benefiting from similar structural trends. For investors with a 10-year horizon, this represents an intriguing opportunity outside the crowded mega-cap space.

Australian Credit: An Island of Opportunity

Artesian's fixed income team confirmed that while U.S. credit spreads remain compressed with limited risk-reward, the Australian market offers better relative value. Investment grade continues to present superior opportunities versus high yield, and Australia's isolation from global spread compression creates a pocket of reasonable value in an otherwise expensive global credit market.

Catalyst Opportunities in Unloved Sectors

James Hawkins from L1 Capital provided transparency into their concentrated Catalyst Fund approach, detailing specific turnaround opportunities in out-of-favor Australian companies. With banks dominating index returns, non-bank value opportunities have emerged for patient investors willing to wait for catalysts to materialise. Their targeted approach aims for a 70% hit rate across their 10-stock portfolio.

Looking Forward: Practice Management Evolution

Damon Riscalla's session on generational wealth transfer highlighted emerging trends from U.S. research applicable to Australian practices. Combined with our new values profiling technology being integrated into the advisor portal, Trellia Wealth Partners is expanding our practice management support capabilities.

Investment Implications

The walking tour reinforced several key themes for portfolio construction:

- Diversification matters more than ever - with U.S. market concentration at extremes, genuine diversification through emerging markets (particularly China) and global mid-caps becomes crucial

- Credit selection requires geographic nuance - Australian credit offers better risk-reward than compressed U.S. spreads

- Patience in value investing - catalyst-driven opportunities exist for those willing to look beyond momentum-driven markets

- Macro vigilance - the disconnect between economic fundamentals and market valuations won't persist indefinitely

Next Steps

We'll be hosting similar events in 2026, including dedicated practice management sessions early in the year. The Manager Walking Tour will return next October, continuing our tradition of bringing you direct insights from our partner managers.

For clients seeking to discuss how these insights might apply to your specific portfolio construction, please reach out to your InvestSense PM.