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Specialist in Asia Pacific, China, India and South East Asia and Global Emerging Market equities.
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formerly Realindex Investments
Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.
Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.
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At Stewart Investors, we believe in putting people first. Our investment world-view is of a series of partnerships – with each other, with our clients, with the companies we invest in, the people who buy their goods and services, and with the wider society in which we all live and work.
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The team boasts one of the largest number of dedicated portfolio managers of cash funds in Australia, with a long term and solid track record of outperformance.
Find out more about our short term investment cash funds today. They aim to provide a regular income from investments in money market securities.
Head of Short Term Investments and Global Credit Tony Togher discusses negative interest rates in Australia, the ongoing role of cash in portfolios and gives insight into how the largest cash manager in Australia continues to add value when rates are low.
Updates and thought pieces from our leading investment experts
Shares, bonds, and alternative asset classes tend to dominate media attention and headlines, but there's a forgotten asset class that underpins most investors’ portfolios: cash. Record low interest rates around the world saw cash fall out of favour with investors in recent years, but prospective returns from cash portfolios are now rising again owing to higher official interest rates in key regions. In this paper, Tony Togher, Head of Fixed Income, Short Term Investments and Global Credit, explains some of the different investments that fall under the category of 'cash', some of the risks to be aware of and, finally, outlines the investment case for cash.
We consider ESG risks to be factors that may place business value at risk. Companies at risk are identified using both external providers and our own internally driven research, which is based on a systematic and extensive company meeting program.
Learn about investing in fixed income today. First Sentier Investors' on-the-ground teams share investment ideas uncovered in developed and emerging markets.
Investors are underestimating Unilever’s sustainability success story. Responsible capitalism model has delivered for investors and society
The well-established First Sentier Investors Australian Small and Mid-Caps team has extended its small companies long short strategy to retail investors for the first time
While the wild swings in share, credit, currency, and commodity markets have garnered most of the attention in the months following the COVID-19 outbreak, cash markets in Australia have seen some highly unusual movements that demand further scrutiny.
Political turmoil, currency fluctuations, and poor governance are common themes amongst headlines about emerging markets investing. It is in the context of these hazards that, in our decades of allocating clients’ capital in this universe of companies, we have looked to find high-quality family owners who act as stewards of businesses over generations, protecting and growing sound franchises that thrive despite the uncertainties that surround them.
2020 has been a remarkable year for infrastructure operators and investors, with Covid-19 abruptly changing the way we work, play and travel. Lockdowns have not been seen on this scale since World War Two, impacting short-term earnings for assets like toll roads and airports.
The First Sentier Wholesale Strategic Cash Fund (‘the Fund’) reported a positive return (0.0032 or 0.32%, gross of fees) for the month of October 2022. This result was a welcome development following the low interest rate environment of the last 2 years, which has seen cash as an asset class struggle to produce higher returns and gain interest. With inflation becoming a key focus globally, the Reserve Bank of Australia (RBA) has begun tightening monetary policy through hiking interest rates, which has seen increasingly positive prospective returns from cash portfolios. The Fund maintains ample liquidity and is well positioned to capitalise off of the current market conditions. This note will dive into the dominant factors driving performance as well as further detail of the investment team’s longstanding approach to managing the portfolio which remains unchanged.
Office real estate is undergoing a fundamental shift, while COVID-19 has accelerated a number of global real estate investment trends, including the continued growth and adoption of e-commerce and falling home ownership.
In an environment of uncertainty, infrastructure investments can provide investors with a sense of reassurance. Regardless of short-term market ‘noise’, every nation depends on roads, utilities, airports, railways, pipelines and wireless towers, in order to function effectively. These sectors share common characteristics, like barriers to entry and pricing power, which provides investors with the potential for inflation-protected income and strong capital growth over the medium-term. Even as the world grapples with the complexities of the pandemic re-opening, we believe the outlook for the asset class is positive. The First Sentier Global Listed Infrastructure Fund invests in a diverse range of assets across a number of regions. However, we see particularly strong opportunities for several infrastructure asset types.
Most investment professionals believe that neither ESG nor long-term factors are efficiently priced by markets. Around 75% believe that investors are over sensitive to short-term factors. A similar number believe that risks and opportunities associated with ESG externalities are not being captured in market value
Given its size and influence, China remains a key investment destination despite ongoing trade disputes and diplomatic tensions with the US and Australia. With a GDP equivalent to around 70% of the United States, many global portfolios continue to feature Chinese equities. Against this background, Martin Lau, Managing Partner at FSSA Investment Managers, provides five insights into the current and future trends shaping the Chinese economy.
The Realindex Australian Share Value-Class A Fund is a real achiever that, since its inception in 2008, has delivered long-term outperformance compared to its benchmark for investors.
There was a large jump in capital raisings – in April alone 26 companies in the S&P/ASX300 issued new stock. By the end of 2020, 104 of these companies had undertaken raisings - the most number of companies that had ever raised equity in single year - totalling almost $40 billion.
First Sentier Investors are the world-leading provider of specialist investment capabilities. Discover how we provide research-led active investment management.
We are entering a new era. The year 2024 will be unpredictable and clouded by many uncertainties. It will be marked by geopolitical risks, the ongoing taming of the inflation beast, and how the US Presidential election will impact markets.
"What we do well by being global is recognising trends that are happening in one part of the world, and seeing that as an opportunity in another part." Peter Meany, Head of Global Listed Infrastructure, discusses global trends in infrastructure assets with Graham Hand from FirstLinks.
People are are at the heart of our success as a leading global asset manager
Characterised by periods of drought, fire and flood, the Australian climate is becoming drier over the long term. A growing population is almost completely reliant on a single, unpredictable source of water – rainfall. Danny Latham, Partner, Unlisted Infrastructure at First Sentier Investors, explores the opportunities for private investment in Australia’s water sector.
In 2020, one group of companies has done particularly well – the popular digital technology companies focused on e-commerce, delivery and entertainment, to name a few industries. In emerging markets, they dominate the Chinese market; but they can also be found in Korea, Southeast Asia, Eastern Europe and Latin America. We do not own many of these in the strategy; and as such, we are often asked: What holds us back? After all, they have performed well and – at least on paper – should have the prerequisite to generate strong returns and free cash flow, given their often high gross margins, negative working capital profiles and asset light nature. While we are not disputing the potential for this in the future, we would argue for cautiousness on most of these projections.
Time flies in the world of investments, and the themes that were emerging last year have gathered speed since then. Late in 2021 we published a Realinsights paper on the long-term relationship between inflation and Value-style investing, focused on whether the inflation spike we had been seeing on the back of the COVID lockdown and stimulus packages would drive outperformance of Value compared to Growth-style investments. Events have moved swiftly since then, including the outbreak of the Russia-Ukraine conflict; high realised and anticipated inflation; and a risk of a global recession. In this context, we have revisited the question of how Value stocks are performing.
As bottom-up investors, the FSSA team carry out well over 1,500 meetings each year to assess company managements’ capabilities and the underlying strength of the franchises they run. These Monthly Manager Views are based on the team’s discussions with company management and the in-depth analysis that follows.
Since our last update, global markets have not been short of action and the manic behaviour characterising today’s markets has taken investors on another rollercoaster ride. While not quite comparable to the market movements seen during the dark days of March 2020, the recent correction — especially in China-related companies — has been notable. Yet, from a market perspective, a sense of normality is finally starting to emerge after the more speculative phases over the past 12-18 months. Companies related to the Work- or Consumed-From-Home environment are starting to discount a more realistic outlook and, equally, franchises with good long-term prospects that were experiencing temporary uncertainties caused by the pandemic have, for the most part, regained some of the lost ground as their underlying business fundamentals continue to improve.
There are four distinct ways to approach ESG investing in systematic investment strategies. Understanding the pros and cons of each can help to align client preferences. How investment managers and asset owners apply and implement their Environmental, Social and Governance thinking really matters to client outcomes.
It’s hard not to react to what the markets are doing. It can be tempting to sell out of certain asset classes or follow the herd to the ‘next best thing’ but fortune favours the patient investor.
Despite the extraordinary events since its launch in June 2007 – including the Global Financial Crisis, volatile commodity prices, and political upheaval in many parts of the world – the strategy has delivered strong, consistent returns through a focus on valuation, quality and active management.
In almost every meeting that we have with management teams, we will ask about incentivisation. In our view, it is an important question and the answer can be highly revealing about an organisation’s culture and behaviour. While it can be easy to be deceived by articulate CEOs talking up a big game with lots of investor-friendly buzzwords, in our experience what ultimately drives outcomes (at least the ones that management teams can influence) are the incentives. As with most things, striking the right balance is key. If there are no incentives to good performance (and no disincentive for poor performance), companies often end up with capital being systematically mis-allocated without any accountability. This tends to be the case with most State-Owned Enterprises (SOEs), which is one of the reasons we are generally cautious on them. On the other hand, too much of a good thing can also have adverse consequences, which we often see in turbo-charged incentive schemes concentrated among just a few senior executives. While they might lead to exponential growth for a short period of time, the growth is usually not sustainable. After a rapid period of expansion, imbalances are typically built up and when growth inevitably slows it is usually not just one skeleton that falls out of the closet.
What will 2021 look like for China? 2021 will be a year of recovery. This is not surprising given last year’s economic downturn. If vaccines are being rolled out gradually during the year, we believe the economy will recover, especially those sectors that have been hit hard like travel. Hong Kong’s travel sector declined by 99.9% last year so there really isn’t much room left to decline.
With the support of MUFG Bank, Ltd., (MUFG Bank), First Sentier Investors has launched a private debt capability focused initially on loans to the renewable energy sector.
Benefits of the rapid recovery of airport and toll road volumes far outweigh the operational issues they now face as a result. We expect higher load factors to compensate for airline capacity cuts, meaning traffic will continue to edge towards 2019 levels. European toll roads have a positive role to play in the decarbonisation of the transport sector, providing both societal benefits and investment return upside.
Incorporated in 1885, BHP began as a silver, lead and zinc mine in Broken Hill, Australia. Over the next century the company grew into one of the largest diversified resource companies in the world with operations including oil and gas, steel production and mining of a variety of commodities including copper, potash, coal and diamonds. It listed on the Australian stock exchange in July 1961, making it the oldest company currently trading, and throughout much of this time it has been the largest company on the ASX by market capitalisation (currently it is ranked third). In 2001 BHP announced it would merge with fellow resource powerhouse Billiton. Billiton also had a long history dating back to a single tin mine in 1851 before growing into a major producer of aluminium, alumina, chrome, manganese, steaming coal, nickel and titanium. The company was Dutch controlled from inception before being acquired by South African firm Gencor in 1994. As the world’s largest metals and mining corporation, BHP Billiton began trading in July 2002 and operates as a dual listed company (DLC) – a corporate structure in which two companies have merged into a single operating business but retain separate legal identities and stock exchange listings (in this case Australia and the United Kingdom ).
We pose the question – what if we could develop a way of predicting which companies are more likely to be suffering distress, and which were not? The idea contains three parts: A. Certain individual observations or metrics can separately tell us about stocks that might – in the near future – find themselves in trouble. B. If we combine enough of these metrics together – without overfitting – we can get synergy between the factors. C. If we build a smart model that is designed specifically to target corporate distress, then we can apply and refine the predictions from the metrics in a better way.
With strong long term growth prospects and a track record of resilience through economic downturns, this increasingly institutionalised property sector is a defensive play for investors.
The Australian Equities Growth team provides a suite of products, including broad based, small cap, imputation, concentrated and geared funds. We believe growing companies, which generate consistent returns and can reinvest above their cost of capital, provide the greatest shareholder value
At First Sentier Investors, the Global Property Securities team is taking a proactive approach to decarbonising our portfolio of Real Estate Investment Trusts (REITs) by setting a net zero emissions target. The REIT sector’s total assets are valued at over US$2 trillion , and as some of the largest landlords in the world, they have clear duty of care to help fight climate change. We have undertaken extensive analysis of our REIT portfolio using sophisticated models, developed in-house, and we are allocating our capital to landlords who are committed to emissions reduction. In this way, we believe real estate investors can play an important part in addressing climate change.
The outlook for the global economy and financial markets looks more uncertain today than it has for a long time. Both interest rates and inflation have risen sharply. There is a growing consensus that much of the world will shortly be experiencing slowing economic growth.
Global listed infrastructure companies outperformed both global equities and bonds in 2022. We believe the financial and economic factors contributing to this outperformance may remain in play in 2023.
The energy crisis in Europe has boosted global demand for LNG. Global listed infrastructure companies pioneered the US LNG industry, investing US$50 billion since 2010. The energy crisis is providing an opportunity for LNG to secure its role as a transition fuel. With reliability and security of supply increasingly front of mind, US LNG exporters stand to gain market share, underpinning a further US$50 billion of investment over the next decade. An increased need for natural gas infrastructure will also benefit the broader North American midstream sector.
Along with business travel demand, the behaviour of Chinese tourists is expected to have a significant impact on the investment opportunity for airports globally as travel restrictions are lifted. The return of Chinese travellers to the airways is one of the great uncertainties affecting airports in a post-pandemic world, a new paper outlines. The return of business travellers is also being closely tracked, with early data suggesting that both business travellers and Chinese tourists will likely return to flying with different preferences and behavioural patterns compared to pre-2019. The paper, entitled ‘A Pre-Flight Checklist For A Post-Pandemic World’, is written by William Thackray, an analyst in First Sentier Investors’ Global Listed Infrastructure team. William examines impacts on airport companies that might stem from changing passenger mixes. He also looks at a range of other factors affecting airports including the evolution of route planning, changing agreements with airport retailers and the increased focus on real estate development projects by airports.
Benchmark Relative. Absolute Return. Total Return? Global unconstrained? Here our global fixed income team demystify some of the common language used to describe approaches to fixed income investing – explaining the differences – and how they can be applied to various objective-based strategies within a broader portfolio.
A company’s reputation and its ‘social license to operate’ (SLO) are two critical intangible assets. Our fifth Climate Change Whitepaper discusses how the increased sophistication of environmental NGOs, public concern and the reach of social media can result in potential challenges for some businesses. It analyses the various costs of reputational risk including the impacts on share price and provides investors with strategies to manage these risks.
This letter forms the first in a series designed to introduce and explain our approach to sustainability, and the lessons learned so far. We hope that these reflections, drawing on the team’s combined experience, will provide a useful insight.
In September 2023, I met more than 30 global listed infrastructure companies and stakeholders from the UK, Europe and China. The following travel diary summarises my impressions and findings from these meetings.
Climate related litigation against directors and trustees is increasing globally. As the science around climate change evolves, how companies prepare for and manage these issues will be increasingly in the spotlight. As climate impacts grow, so do the duties, risks and implications for both companies and investors. Below is a brief summary of the fourth Climate Change Whitepaper – Fiduciary & Directors duties and legal risks for companies.
On the anniversary of Lehman's collapse and as Typhoon #10 approached Hong Kong, Martin Lau spent time reflecting on the 1997 Asian Financial Crisis and here discusses if lessons learned are enough to steer us clear of another global financial crisis.
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