Apt Wealth plans to deploy cash to small mid-caps, infrastructure

Published on: February 20th, 2023

This article was originally published by Citywire Australia. If you have a Citywire Australia account you can access the article here.

With an overweight in cash, the wealth manager is waiting for the right time to allocate to more risk assets later this year.

The next six months will be quiet investment allocation-wise for Apt Wealth Partners as the wealth manager is expecting to make portfolio changes towards the end of the year in the small mid cap and infrastructure space.

Apt senior investment analyst Adam Bajcarz said the second half of this year and early 2024 would likely see inflation under control or a recession as it took 12-18 months for monetary policy to take effect.

‘Early next year will likely be a time when a lot of things would have sold off and things might look quite bleak,’ he said.

The analyst said Apt’s portfolios were overweight cash as it was taking a cautious view and would look to deploy that cash into more risk assets when things got too pessimistic.

‘We’d be looking to increase our allocation into the small mid-cap space both internationally and Australia because small caps appear to be what’s been hardest hit. We’re also looking to increase our infrastructure allocation as we’re positive on the asset class long term,’ he said.

Small mid-caps

Bajcarz said the small and mid-cap space had sold off more aggressively and valuations were more attractive, including quality small mid-caps.

‘Even when you look at the historical relationship between large caps or small caps – large caps always traded a premium but that relationship is even wider at the moment now,’ he said.

‘It’s a segment we find quite attractive as it generally rebounds quite well and has high beta on the recovery wise.’

Bajcarz said one of his favourite small-cap funds was the Bell Emerging Companies fund. Over the three years to 31 January the fund returned 6.3% compared with its MSCI World SMID Cap Index return of 4.9%.

The fund’s managers Ned Bell and Adrian Martuccio said they felt their investment approaching was ‘coming into a sweet spot’ in the latest fund commentary.

‘The combination of a strong quality bias and valuation discipline should work well against a challenging backdrop in 2023,’ they said.

‘We feel that 2022 was an anomaly in that quality as a style rarely lags when inflation is at elevated levels. We expect this anomaly to correct itself in 2023 and 2024 and therefore expect a solid period of relative performance.’


However, Bajcarz noted that on the infrastructure side the wealth manager was looking in the global board space rather than owning Australian listed securities as a lot of the large superannuation funds had bought most of the assets in that space.

‘If you look at our utility sector there’s only two assets left in that whole sector. Whenever you see someone talking about utility sector, it’s not really resembling very much when two securities is all that’s in there,’ he said.

‘Any of those defensive assets have all been snapped up by the big industry super funds and taken private. It makes it a lot harder when you’re looking for a growth asset but something in the middle area that is a bit more defensive that has inflation-linked income.’

Two infrastructure funds the analyst liked were ClearBridge Rare Value Fund and the Atlas Infrastructure funds.

The ClearBridge Rare Infrastructure Value Hedged fund returned 3.4% compared with the S&P Global Infrastructure Index return of 0.8% over the three years to 31 January. The unhedged version returned 2.6% compared with the S&P Global Infrastructure Index Unhedged return of 5%.

Most of the investment team manging the ClearBridge funds – Shane HurstNick LangleyCharles Hamieh, and Simon Ong – are Citywire + rated.

The Atlas Infrastructure Hedged fund returned 5.1%, while the unhedged version returned 3.3% compared with its G7 CPI +5% benchmark return of 9.6%.

However, over the five years the hedged fund returned 10.8%, while the unhedged version returned 11.5% compared with its benchmark return of 8.5%.


This article was originally published by Citywire Australia. If you have a Citywire Australia account you can access the article here: https://citywire.com/au/news/apt-wealth-plans-to-deploy-cash-to-small-mid-caps-infrastructure/a2409708

General Advice warning

The information provided in this article does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.