Instability in private credit markets, including concerns about opaque structures, uneven underwriting and constrained exits, is driving interest in the safety and daily liquidity of the local bourse.
“This is a durable tailwind for quality Australian equities and one we expect will persist into 2026,” CIO Emanuel Datt said.
“There are also several other factors which we believe will support local equities over the next few months.”
Companies with strong balance sheets, durable earnings and management teams with proven records of capital allocation are expected to outperform, according to the firm.
“We are also attentive to M&A-ready situations where governance improvements, portfolio simplification or credible cost programmes can compress the gap between intrinsic value and market price,” Datt said.
The valuation gap between Australian and US markets is attracting strategic financial buyers to Australia. With lower entry points, robust governance and transparent takeover rules, Australia offers a compelling environment where well-run companies can act as disciplined acquirers or appealing targets, creating value for shareholders.
The new US-Australia framework on critical minerals and rare earths represents another positive step, expected to reduce the cost of capital for Australian mineral producers.
“The framework commits both countries to mobilise financing, accelerate permitting and develop pricing mechanisms to secure supply chains from mine to processing. In our view, that policy scaffolding could have wide-ranging benefits not just for minerals products but also services, logistics and advanced manufacturing adjacent to the sector,” Datt said.
Real interest rates near zero - despite higher government spending - continue to underpin local equities. Businesses with strong pricing power, steady cash flows and conservative leverage are best placed to thrive, according to Datt.
“We have seen the strength of selective quality companies across our portfolios,” he noted.
For September, the Datt Capital Small Companies Fund delivered a net return of 10.21% relative to the benchmark (xSOA), which delivered 3.44%. The Fund has provided a net return of 40.68% per annum since inception, significantly outperforming its benchmark by 20.56% per annum.
The Datt Capital Absolute Return Fund has delivered 20.12% annualised net returns, or a 270.98% net cumulative return to investors since its inception in August 2018.
