Aus small caps, global equities rise through adviser ranks: Fidante

A survey of financial advisers conducted by investment manager, Fidante, has touted global equities and Australian small caps to deliver strong performance and opportunities for investors in the next six months.

The first ‘Fidante Adviser Markets Survey’ of 200 financial advisers suggested that 46 per cent had adopted a bullish outlook on the performance of global equities, with 39 per cent expecting it to be the top performing asset class over the next six months.

Over half of those surveyed (51 per cent) also indicated that they were bullish on the forecast for Australian small caps, pivoting away from the prevailing popularity of large cap stocks such as the Magnificent Seven in the US.

More than one in three advisers (35 per cent) said they were looking to increase client allocations to Australian small caps, just trailing behind fixed income (41 per cent) and well ahead of global equities (20 per cent).

“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,” Victor Rodriguez, Chief Executive, Funds Management, Challenger, 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.”

The shift towards Australian small caps and lower indication of increasing client allocations towards global equities also speaks to some concerns raised by financial advisers in the survey results regarding high valuations in global markets (26 per cent), economic slowdown (23 per cent) and geopolitical tensions (22 per cent).

Considering the opportunities within the local market, economic slowdown (44 per cent) and high valuations (27 per cent) were the top two concerns flagged by financial advisers. Rodriguez said this indicates “inflation is no longer a primary concern”.

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

“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.

“Fidante’s latest Adviser Markets Survey shows that diversification and targeted allocation remains a key priority for advisers with infrastructure (30%), private credit (24%), and private equity (18%) capturing their attention.

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