POWERED BY MOMENTUM MEDIA
Tightening credit determines stock preferences
A reduction in credit growth has influenced the current positioning of Australian equity funds, which includes being underweight bond proxies and higher price-earnings stocks, DNR Capital said.
According to DNR Capital chief investment officer, Jamie Nicol, there could be little doubt that when looking at a period of reduction in credit growth that this would have a headwind effect for consumers.
“It seems most likely that this will have some incremental flow-on effect on the housing sector and consumer behaviour,” he said.
At the same time, the bigger risk would be if the reduction in credit availability snowballed into a fully blown credit crunch.
The Royal Commission turned the spotlight on the banks’ responsible lending obligations, Nicol stressed.
“In this environment our suite of Australian equities portfolios – ‘High Conviction’, ‘Socially Responsible’ and ‘Income’ will be managed in accordance with a number of key considerations,” he said.
“Given the inflation outlook, DNR Capital’s Australian funds are underweight bond proxies and we are reducing exposure to higher price-earnings (PE) ratio stocks. With regard to elevated household debt to GDP we are underweight consumer stocks and banks.
“We are maintaining exposure to companies invested in mining and infrastructure spending, noting corporate debt is low and capex is rising.”
In terms of specific stocks, the firm said it was building positions in names like Woolworths Group and found opportunities in companies like CYBG and companies whose balance sheets and outlooks had improved substantially, like Woodside Petroleum.
Recommended for you
In this latest edition, Anna Shelley, CIO at AMP, shares the fund’s approach to current market conditions and where it continues to uncover key opportunities.
The mega fund has announced a $2.2 billion investment in a leading data centre platform, bringing its global real assets portfolio to nearly $60 billion.
In this latest edition, Australian Retirement Trust’s head of global real assets Michael Weaver explains the fund’s approach to finding new opportunities as it surpasses $300 billion in funds under management.
Fund managers remain hopeful for a Chinese revival story despite the “disappointing” stimulus package announced this week.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
32.57 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
32.09 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
27.42 3 y p.a(%)
