Advisers bullish on global equities, Aussie small caps survey finds

Fidante’s survey of financial advisers shows global equities and domestic small caps are expected to offer the best opportunities for local investors over the next six months.

Challenger CEO of funds management Victor Rodriguez.

Global equities and domestic small caps are expected to offer the best opportunities for local investors over the next six months, according to Fidante’s survey of financial advisers.

Almost half of the advisers surveyed were bullish on the performance of global equities for the next six months, with 39 per cent predicting it would be the best performing asset class in the period.

One in five advisers planned to increase allocation to global equities in the coming six months.

At the same time, 43 per cent thought cash will be the worst performing asset class.

“One of the biggest takeaways from the survey was just the general nature of the bullish sentiment that advisers were expressing”, said Victor Rodriguez, chief executive of funds management at Challenger.

The inaugural survey of 217 financial advisers in the Fidante adviser network was conducted in October.

Part of the ASX-listed investment management company, Challenger Group, Fidante is a global investment management business with about $100bn under management as of September 30.

Traders work on the floor of the New York Stock Exchange. Picture: AFP

Fidante is one of Australia’s largest active investors, offering compelling strategies across equities, fixed income, and alternative assets, via partnerships with leading investment teams.

Driven by the AI theme and the Magnificent Seven US tech giants, the biggest companies have dominated again this year. With Nvidia up 177 per cent and the Magnificent 7 up 42 per cent so far this year, the S&P 500 was up 26 per cent for the year-to-date after rising 24 per cent in 2023.

But survey respondents also saw Australian small caps as a priority for the coming six months.

Over half of advisers surveyed (51 per cent) were bullish on the outlook for Australian small caps, compared to only 32 per cent who were bullish on Australian large caps.

In fact, 35 per cent of advisers expect to increase client allocations to Australian small caps, second only to fixed income (41 per cent). Only 9 per cent planned to increase their allocation to Australian large caps, while 16 per cent planned to decrease their allocations.

Mr Rodriquez said the results reinforce the trend Fidante is seeing with recent strong inflows to this asset class and clear demand for active management to capitalise on the opportunities.

“Led by the US, global equities have driven significant outperformance for several years now, and our research shows that advisers expect this trend to continue as we enter 2025,” he said.

“Specifically, AI and healthcare are driving exciting growth potential in global equities, and we expect inflows to reflect this. As we head into 2025, advisers’ optimism highlights the lasting appeal of global equities as a powerful tool to generate returns, even amid economic challenges.”

Despite the bullish outlook, advisers flagged concerns that global markets may be becoming too expensive. High valuations were the leading concern for 26 per cent of respondents, closely followed by economic slowdown (23 per cent) and geopolitical tensions (22 per cent).

Global equities and domestic small caps are expected to offer the best opportunities for local investors over the next six months. Picture: AFP

Locally, economic slowdown (44 per cent) and high valuations (27 per cent) were by far the two leading concerns facing Australian equities in the coming six months.

“Inflation is no longer a primary concern and attention is focused on valuations and the potential for an economic slowdown,” Mr Rodriguez said.

But with markets setting record highs in recent months, clients wanted to rebalance their portfolios to preserve their desired portfolio weightings.

“Advisers are responding to high valuations in large cap stocks,” said Evan Reedman, General Manager, Fidante Affiliates.

“We’re observing a clear shift in focus towards Australian small cap equities, with advisers recognising untapped value in this space after lagged performance in recent years.”

The survey showed that diversification and targeted allocation remained a top priority for advisers with infrastructure (30 per cent), private credit (24 per cent), and private equity (18 per cent) capturing their attention.

“There is no doubt that advisers are looking for active management in market segments that provide a clear purpose, whether that be to generate alpha, provide uncorrelated returns, or deliver a consistent income stream,” Mr Reedman said.

Originally published as Advisers bullish on global equities, Aussie small caps survey finds