In this short video, Pendal’s Income and Fixed Interest team outline the expertise, diversity of thought and disciplined decision-making processes that drive outcomes for clients
An excerpt from the team’s interview
Pendal’s Income and Fixed Interest team bring together deep experience, specialised knowledge and a collaborative structure that help set it apart in the market.
In this video, the four lead portfolio managers — Amy Xie Patrick, Tim Hext, Steve Campbell and George Bishay — explain the advantages of specialisation.
“We don’t want people covering too much – true expertise takes time and depth,” says Tim Hext, head of government bond strategies.
“We focus on depth, and we back that with strong quantitative models and real-world insight from markets, central banks and beyond.”
Pendal maintains a unified approach to cash, credit, income and government bond strategies which encourages richer discussions and stronger risk awareness.
“We’re constantly cross-pollinating ideas,” says Steve Campbell, head of cash strategies. “Every portfolio decision benefits from diverse perspectives and a shared understanding of risk.”
Further supporting this model is the team’s top-down process, which George Bishay – head of credit and sustainable strategies – says blends quantitative modelling with real-world experience and market insight.
“It’s this combination that helps us actively manage risk and seize opportunity,” he says.
Whether supporting institutions, advisers or individual investors, the Income and Fixed Interest team prioritises strategic thinking, active risk management and – importantly – strong client partnership.
“From sovereign wealth funds to everyday investors, we work hard to understand each client’s needs and help them build stronger portfolios for the long term,” says Amy Xie Patrick, head of income strategies.
Get to know our portfolio managers better in these individual profile videos:
Find out about
Pendal’s Income and Fixed Interest funds
About Pendal
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.
Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.
Australia’s March-quarter inflation data signals good news for Australia’s economy in 2025, says Pendal’s head of government bonds TIM HEXT
AFTER a chaotic April, it was great to focus on the Australian economy again following the release of today’s inflation data.
The March-quarter data showed all inflation indicators within the Reserve Bank’s target zone of 2% to 3%: headline at 2.4%, underlying (trimmed mean) at 2.7%, and the April monthly indicator at 2.4% year on year.
More importantly, services inflation – largely domestically driven and two-thirds of the inflation basket – has fallen to 3.7% from its 2023 peak of 6.25%. Goods prices remain below 2%, having corrected far quicker in 2023 than services.
The good news
In terms of detail in the inflation release, let’s start with the good news.
The two main culprits of very high inflation a few years ago are now well behaved.
Prices on new dwellings (7.6% of the CPI basket) fell for a second quarter. This is measured by costs of new project homes, where there is evidence of discounting.
Given the housing shortage though, this may be as good as it gets.
Rents (6.6% of the CPI basket) grew at 1.2% and are now growing at a more manageable annual rate of 5%.
Also keeping a lid on inflation were further falls across a wide range of goods. Clothes, footwear, household items and computing equipment all had decent price declines.
Finally, international travel prices fell almost 8% in the quarter, partly a roll back of pre-Christmas price hikes.
The not-so-good news
On the not-so-good news side of the ledger, electricity prices are rising once again, as subsidies roll off (CPI is measured on a net of subsidies basis).
Prices increased 16% over the quarter and will continue to rise as other subsidies expire.
Education prices were up over 5% as private schools, as always, took the opportunity to hike fees more than 6% for this year.
Education, health, insurance and council rates largely only change annually. This is all great news for the new government and the Reserve Bank.
Interest rate relief should be a consistent theme throughout the year, with cuts in May, August and November likely.
This would leave cash rates at 3.35% by year-end, around the level considered to be neutral or “natural” through the cycle.
Markets still have more than 1% of cuts, so short end bonds are vulnerable to slightly higher yields near term. Longer-dated yields should remain supported by lower yields offshore.
By year-end, the economy should be growing near trend at 2.5%, unemployment at a still-low 4.25%, underlying inflation should be near the 2.5% target, and wages should be growing around 3.25%, allowing for modest cost of living relief.
What’s not to like?
Clearly, offshore developments will remain the big story in May. Whether global developments bring new shocks to the market remains the risk.
But beyond all the noise, the Australian economy is in pretty good shape with reasons to be optimistic in 2025.
The shocks of Covid have fully passed through inflation, wages, employment and GDP, and normal transmission has been restored – at least for now.
Learn more about Tim in his latest Pendal profile interview, as he explains why the case for bonds – and active management – has never been stronger.
explains why the case for bonds – and active management – has never been stronger
About Tim Hext and Pendal’s Income & Fixed Interest boutique
Tim Hext is a Pendal portfolio manager and head of government bond strategies in our Income and Fixed Interest team.
Tim has extensive experience in banking, financial markets and funding including senior positions with NSW Treasury Corporation (TCorp), Westpac Treasury, Commonwealth Bank of Australia, Deutsche Bank, Bain & Co and Swiss Bank Corporation.
Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.
Find out more about Pendal’s fixed interest strategies here
About Pendal
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.
In 2023, Pendal became part of Perpetual Limited (ASX:PPT), bringing together two of Australia’s most respected active asset management brands to create a global leader in multi-boutique asset management with autonomous, world-class investment capabilities and a growing leadership position in ESG.
Effective 30 April 2025, the buy-sell spread for a number of Pendal funds (the Funds) will decrease as set out in the table below:
Table 1: Old and New Buy-Sell Spreads
| Fund Name | Old (%) | New (%) | ||
| Buy | Sell | Buy | Sell | |
| Pendal Dynamic Income Fund | 0.12% | 0.15% | 0.12% | 0.12% |
| Pendal Dynamic Income Trust | 0.12% | 0.15% | 0.12% | 0.12% |
| Pendal Fixed Interest Fund | 0.06% | 0.08% | 0.06% | 0.06% |
| Pendal Monthly Income Plus Fund | 0.10% | 0.16% | 0.10% | 0.10% |
| Pendal Short Term Income Securities Fund | 0.03% | 0.07% | 0.03% | 0.03% |
| Pendal Short Term Income Securities Trust | 0.03% | 0.07% | 0.03% | 0.03% |
| Pendal Sustainable Australian Fixed Interest Fund | 0.07% | 0.11% | 0.07% | 0.07% |
| Regnan Credit Impact Trust | 0.10% | 0.17% | 0.10% | 0.10% |
The buy-sell spread is an additional cost to you and is generally incurred whenever you invest in or withdraw from a Fund. The buy-sell spread is retained by the Fund (it is not a fee paid to us) and represents a contribution to the transaction costs incurred by the Fund such as brokerage and stamp duty, when the Fund is purchasing and selling assets. The buy-sell spread also reflects the market impact of buying and selling the underlying securities in the market. Importantly, the buy-sell spread helps to ensure different unit holders are being treated fairly by attributing the costs of trading securities to those unit holders who are buying and selling units in the Funds.
Following the initial impact of the Trump tariff announcement, investment markets have experienced an improvement in market conditions. This has led to increasing liquidity and a reduction in market impact when selling Australian credit securities. Consequently, trading costs in these markets have decreased, leading to lower trading costs for the Pendal Income and Fixed Interest Funds (as set out in Table 1 above).
Pendal has determined to decrease the buy-sell spread for each of the Funds as set out in Table 1 above. The buy spread is payable on application to a Fund. The sell spread is payable on withdrawal from a Fund.
Pendal will continue to monitor market conditions and review and update the buy-sell spread regularly as required. You should therefore review the current buy-sell spread information before making a decision to invest or withdraw from a Fund.
Please refer to our website www.pendalgroup.com, click ‘Products’, select the Fund and click on ‘View fund information’ for the latest buy-sell spread for each Fund.
Here are the main factors driving the ASX this week, according to analyst and portfolio manager ELISE McKAY. Reported by head investment specialist Chris Adams
THE market has taken some comfort in rhetoric emerging from Trump’s camp regarding negotiations for more favourable tariff outcomes – and refraining from firing Fed chairman Jay Powell.
As a result, last week – while a short one for us in Australia – was a good one for markets, with the S&P/ASX 300 up 1.9%, the S&P 500 up 4.6% and the NASDAQ up 6.7%, almost wiping out all the drawdown since Liberation Day on April 2.
The VIX (a measure of equity market volatility) also moved sharpy lower. However, the risk of a bounce in volatility and further equity sell-offs remains high.
Broad investor positioning, while improved, is still not great.
Neither we nor the market have sufficient conviction in the macro data to make a big call either way on the economic outlook.
Complicating this further is a potential change in the global order and an end to the narrative of US Exceptionalism, leading to capital flow migration out of the US with subsequent effects for the US dollar (USD) and gold.
We saw this in the Aussie market last week, with anecdotal evidence that global asset allocation decisions are contributing to ASX 20 outperformance.
US policy
The past two weeks have been characterised by classic Trump brinkmanship, leading to significant volatility as the market questioned the strength of US institutions.
In a scene straight out of The Apprentice, Trump floated firing Fed Chair Powell on April 16.
Markets took the news badly, effectively painting Trump into a corner and illustrating the market’s role as a moderating force on political overreach. By April 22 Trump had reversed course, stating that he had “no intention of firing Powell”.
Tariff rhetoric developed over the past two weeks, adding to market uncertainty.
- While the sweeping Liberation Day tariffs (including 145% tariff on Chinese imports) were announced on April 2, the rhetoric sharpened further mid-month.
- On April 16 Trump warned that countries failing to finalise trade deals in the next 2-3 weeks would face new tariff measures and specifically singled out European autos as a potential target.
- Meanwhile, China’s 125% retaliatory tariffs on US goods, implemented on April 11, remained in place.
- By April 23, Treasury Secretary Bessent attempted to soften the tone, suggesting the trade war with China was “unsustainable” and hinting that some tariffs could eventually be negotiated lower (from 145% to ~50-65%).
- European leaders also responded, publishing countermeasures against US tariffs on April 14, but pausing implementation for 90 days to allow negotiations.
Overall, while no new tariffs were enacted over the past fortnight, heightened trade tensions reinforced volatility and amplified concerns over the global growth outlook.
Using the current “best case” scenario of 50-65% tariffs for China and 10% for the rest of the world, this would still equate to 16.5-18.5% blended tariff rate – or a US$480-540bn incremental “tax” on US consumers.
Market positioning and flows
Amazingly, the S&P 500 is now only down 2.6% from Liberation Day, though it remains 10% below peak levels in February.
Volatility has also improved, with the VIX halving from the peaks seen post-Liberation Day.
That said, market breadth remains poor, with relatively few stocks driving the rebound.
Hedge funds remain highly active, with gross leverage above 200%. But a modest 47% net exposure suggests positioning is heavily relative rather than taking a directional view on markets.
This suggests we are still operating in an environment with elevated crowding risk and the potential for forced de-risking if volatility spikes again.
The potential impact of liquidity is evidenced in the S&P E-mini market. S&P E-minis are electronically traded futures contracts for the S&P 500, which is one-fifth the size of a standard S&P 500 futures contract.
Volumes of buy and sell orders at the best bid and ask prices are very thin, raising the risk that even modest order flows could drive sharp price swings.
This backdrop has also driven hedge funds to lean more heavily on ETFs for hedging and risk management, amplifying the risk that macro-driven flows (rather than fundamentals) could dominate near-term market moves.
Anecdotally, long-only managers have been raising cash, though that started to shift last week as the selling of mega-cap tech slowed and there was some scattered interest in the Mag-7 following the results from Intel and Alphabet.
Capital flows have also started to shift away from the US and into other global markets, shaping the trajectory for the USD and influencing the gold price.
Within Australia, there is commentary around global asset allocators moving away from the US and into other markets – including Australia, where the ASX 20 has benefited and outperformed.
Evidence of some more constructive flows was seen mid-last week, where hedge funds looked to cover shorts and bought single stock names. But this is still very early days and the fundamentals are unclear.
We await greater certainty over tariff outcomes and earnings resilience to restore confidence in the market.
Meanwhile, the retail buyer has not cracked and Corporate America should also start returning to the market this week with US$1.35 trillion authorised buybacks in place and an estimated $1 trillion execution for 2025 (up 5% year-on-year).
Find out about
Pendal Focus
Australian Share Fund
Crispin Murray,
Head of Equities
So, what are the fundamentals saying?
US earnings season has not been as bad as feared.
About 35% of the S&P 500 have reported 1Q results with revenue growth of 4.9% and earnings up 20.6%, beating expectations.
Forty per cent of market cap is reporting this week, including Apple, Amazon, Meta and Microsoft (we will be watching closely for readthrough for data centre demand from these “hyperscalers”).
But earnings data is backwards looking, and it takes several months before we start to see the effects of tariffs flowing through.
Historically, according to work by Goldman Sachs, the Philadelphia Fed Manufacturing Index, the ISM Services indices, jobless claims and the unemployment rate have been the most accurate and relatively real-time signals of growth slowdowns.
In past recessions with a clear precipitating event – such as we saw with Liberation Day – it takes roughly three to four months for clear signs of deterioration to show up in the hard data, with surveys of expectations first showing signs of decline.
While we are still in the first few weeks following Liberation Day, there are some signs that survey-based expectations have moved significantly lower.
The Evercore ISI Company Survey – which looks to capture a real-time snapshot of economic activity and trends – came in at 48 last week, which is firmly in the “Struggling” zone of 45-50. Less than 45 is classed as “Recession.”
The decline was led by retailers and the capital goods sectors, suggesting the recent bumps relating to pre-buying ahead of tariffs have abated. Restaurants have also declined as consumers pull back on discretionary spend.
Alternative data like the Freightwaves Outbound Tender Volumes Index (a measure of how often shippers request carriers to move loads) has trended down. Tender volume is now down about 15% year-on-year (YoY).
Ocean booking volumes out of China into the US are also currently down about 25% YoY.
The Port of Los Angeles stated last week that it expects a 35% drop in import volumes in two weeks, “as essentially all shipments out of China for major retailers and manufacturers has ceased”.
Meanwhile, shipping liner Hapag-Lloyd is currently observing an estimated 30% decline in bookings out of China and a surge in bookings out of South East Asia as importers look to build inventories before the pause on tariffs for the world ex-China ends in early July.
The key conclusion on the macro situation – it’s complicated.
Therefore, we take recent macro data with a grain of salt; we need more time to see how meaningful the effects of recent events have been on the economy.
The Purchasing Managers Index (PMI) released by S&P mid-last week suggests a sluggish economy rather than one heading straight to recession.
- The flash composite PMIs of 51.2 in April declined from 53.5 in March and was below consensus (52) but is still consistent with a growing economy.
- And whilst businesses are more pessimistic about demand, they are also driving net employment growth with the employment index of 50.8 above the 12m average of 50.2.
- The output price index of the manufacturing survey at a 29-month high of 60.8 suggest the US is on track for core goods inflation rising from 0% in March to mid-3s.
- In contrast, services sector inflation indicators were benign, within the 18-month historical range.
The University of Michigan Consumer Sentiment Survey was weak, falling to 52.2 – the fourth lowest monthly reading since the 1970s.
Existing home sales are at extremely low levels, dropping to 4.02m in March, versus 4.27m in the same month last year and below consensus expectations for 4.13m.
The US housing market remains subdued, with new mortgage rates at 7% dwarfing that of average existing mortgage rates at around 4.3%.
However, jobless claims remain in their recent historical range and continuing claims track sideways.
A changing world order?
With so much up in the air and markets still at risk of meaningful volatility events, this all begs the question: what has caused this change in the world order and how sustained will it be?
Since the GFC, the theme of US Exceptionalism has reigned supreme.
This is the concept that strong institutions, better technological innovation and a growing population have contributed to higher productivity, and superior US corporate profitability and GDP growth versus the rest of the world.
This attracted global capital flows – foreign investors entered 2025 with a record 18% ownership of US equities. US equities have grown from 45% of global markets in 2008 to more than 70% today.
However, this narrative has been challenged in 2025 by:
- Trump’s focus on fixing the fiscal deficit, which has reached 7%
- China’s potential threat to US technology dominance with the disclosure of DeepSeek’s AI capabilities
- An improved outlook for European growth following the election of a pro-growth German government.
As Trump’s term has progressed and the tariff war has escalated, economies outside of the US appear increasingly attractive – and capital flows have followed.
This – exacerbated by fears around the sanctity of Fed independence and of recession – has seen underperformance of the S&P 500 versus other key regions, a rise in US Treasury yields and a fall in the currency, with the US Dollar Index down 4.5% in April and 8.3% since the start of the year.
Goldman Sachs estimates that foreign investors have sold an estimated US$60bn of US stocks since the start of March.
The reallocation of capital away from the US has substantial implications for the USD and gold.
Again, Goldman Sachs estimates that the USD is ~20% overvalued, with the real value of the dollar about two standard deviations above the average since it floated in 1973.
We have only seen similar valuation levels in the mid-1980s and early 2000s, both which subsequently saw depreciations of 25-30%. The latter provides a helpful case study to understand how a global synchronised asset allocation shift away from the US can lead to a substantial devaluation of the USD.
This suggests further downside beyond the depreciation we have seen to date.
With an estimated $22 trillion in US assets owned by foreign investors, any widespread decision to reduce this exposure would likely contribute to significant additional dollar depreciation.
The key takeaway is consistent with our long-held view that flows matter to markets.
Australian equities
What does this mean for the Australian market?
We are a potential net beneficiary of flows. We saw the S&P/ASX 20 outperform last week, up 2.5% versus 1.9% for the S&P/ASX 300 and up 0.3% for the S&P/ASX Small Ordinaries.
This is possibly an outcome from global asset managers reducing US equities exposure and upweighting global exposures, of which Australia is a beneficiary.
The gold sector has been volatile, reflecting concerns around geopolitical tensions and uncertainty, a weakening USD and still-strong central bank demand.
Macro headlines and quarterly results were key drivers of this week’s stock specific performance.
About Elise McKay and Pendal Australian share funds
Elise is an investment analyst and portfolio manager with Pendal’s Australian equities team. Elise previously worked as an investment analyst for US fund manager Cartica where she covered a variety of emerging market companies.
She has also worked in investment banking and corporate finance at JP Morgan and Ernst & Young.
Pendal Horizon Sustainable Australian Share Fund is a concentrated portfolio aligned with the transition to a more sustainable, future economy.
Pendal Focus Australian Share Fund is a high-conviction equity fund with a 16-year track record of strong performance in a range of market conditions. The Fund is rated at the highest level by Lonsec, Morningstar and Zenith.
Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.
Here are the main factors driving the ASX this week, according to Pendal portfolio manager PETE DAVIDSON. Reported by investment specialist Jonathan Choong
LAST week, we witnessed peak uncertainty with daily changes in tariff policies creating a roller-coaster week for equities. A steep sell-off was driven by China’s retaliation against the United States’ tariff escalations.
This was soon followed by President Trump’s announcement of a 90-day pause on reciprocal tariffs for 70 countries, excluding China.
On what has come to be known as “Pause Wednesday,” 30-year bond yields touched 5.0%, marking the third widest range for Treasuries in modern history, trailing only the worst moments of the Global Financial Crisis (GFC) and COVID-19 pandemic.
This spike in yields prompted Trump to pause tariffs, as the risk of significant contagion in markets had heightened materially.
Late in the week, China increased tariffs on US goods from 84% to 125%, essentially creating a trade embargo between the two largest economies.
Markets now eagerly seek an off-ramp from this “tariff ping pong,” with Xi and Trump expected to negotiate.
Equities responded positively to the pause, with a strong rally starting from Wednesday onwards. Follow-up buying on Friday from retail investors lifted US indices higher, even as China raised tariffs to 125%.
Surprisingly, the S&P and Nasdaq had their best weekly performance since November. In the US market, every sector ended the week in the green. Materials, Technology, Energy, and Industrials outperformed, while Utilities, Communication Services, and Consumer Discretionary were relative underperformers.
Last week had the third-largest spike in 5-day realized equity volatility since the market crash of 1987, trailing only the GFC and COVID-19. This rising volatility reflected the markets adjusting to the medium-term implications of the highest tariff rates since the 1800s.
The VIX surged above 43, and US high-yield spreads also widened significantly, reflecting a risk-off environment. Higher German and Japanese yields relative to the US also suggest a reversal in carry trades, likely putting pressure on equity markets.
Amongst this volatility gold increased by 7.0% for the week, reaching new record highs as investors flocked to the safe-haven asset. In AUD terms, gold has risen by 40% over the past year.
Before “Pause Wednesday,” basis-trade concerns rose about leveraged players holding approximately 10-20% of the US bond market, causing sensitivity among hedge funds with significant treasury exposure.
Looking ahead, a volatile 90-day negotiation period on reciprocal tariffs is expected, with many leaders and treasurers engaging in talks. Discussions will likely include FX rates, Non-Tariff Barriers (NTBs), and overall disposition toward the US.
Tariff background
President Trump’s 2.0 strategy includes higher tariffs, bilateral trade deals, a lower USD, reshoring, and domestic tax cuts.
The overarching goals appears more politically motivated than economic, given that The US has witnessed a steady decline in its manufacturing sector, particularly in the rustbelt regions, and has held long-term trade deficits with mercantilist trade partners.
The desire therefore to address the persistent trade deficits, which had exceeded $1 trillion post-COVID, and to curb the strength of the USD.
In addition, the US fiscal position remains vulnerable, with a year-to-date deficit of $1.307 trillion, a significant increase from $1.065 trillion the previous year.
Receipts rose by 3.3%, while outlays increased by 9.7%. Public debt to GDP stood at approximately 120%, surpassing post-WWII levels and posing sustainability concerns.
Government interest payments in March amounted to $93 billion, marking a 17.5% increase and becoming the second-highest spending line after Social Security. This fiscal vulnerability underscored Treasury Secretary Bessent’s focus on managing US bond yields to prevent exacerbated financial instability.
China has already been decreasing its Treasury holdings since 2015. Trump’s 2.0 approach is guided by his 2018 experience where tariff hikes led to a 17.9% increase in effective tariffs and a 13.7% fall in the CNY. Note this time around the trade war has accelerated much faster than in 2018/19.
The proposed solution
In his first term, tariffs resulted in heightened use of layover countries for re-exports, such as Vietnam, Mexico, and Canada, to address trade imbalances. This time around, there’s a push for a more major reset lot meaning more bilateral trade deals, more focus on shifting supply chains to bring back manufacturing back to the US.
Higher tariffs and reshoring efforts are expected to shift US spending patterns from goods with high tariffs to those with low tariffs and services.
While this strategy is estimated to generate $700-750 billion annually from tariffs, net new annual revenues are likely around $500 billion (1.7% of GDP) due to the restraining effect of tariffs on real GDP growth.
The goal is to use tariff revenues to offset tax cuts and foster a recovery in domestic manufacturing.
However, the proposed solution is not without complications.
The US had been overspending relative to other developed nations, leading to persistent per capita GDP growth at the expense of current account issues and fiscal deficits.
Even with an increase in the trade balance and the manufacturing share of employment under Trump’s administration, the efficacy of this policy remained debatable.
For instance, despite Germany’s long-standing trade surplus over two decades, it still faced a decline in manufacturing employment, illustrating that a shift toward onshore manufacturing might not be sufficient to improve the trade balance.
There is also a risk of capital flight if the rest of the world reduces holdings of USD assets.
Macro and policy US
The US inflation rate showed signs of slowing, with March CPI data delivering a second consecutive month of downside surprises.
Core CPI inflation decelerated to 0.06% month-over-month (2.8% year-over-year), while headline CPI posted a deflation of 0.05% month-over-month (2.4% year-over-year), helped by a drag from energy prices.
The 90-day tariff pause is expected to slow growth as households and firms rush to complete overseas purchases before potential tariffs take effect.
This surge in imports could drag on Q2 growth but may be offset by stronger consumer spending in Q2, followed by a slowdown in Q3.
Uncertainty among businesses remains high, potentially leading to a pause in hiring and investment. Planned price increases due to tariffs might also be delayed.
The ongoing DOGE-government layoffs and hiring freeze are affecting approximately 8 million out of the 171 million workforce (~5%).
Federal job stability is now in question, with spending freezes and disbursement delays impacting sectors like education. Foreign travellers and students are opting for destinations outside the US, which could affect local spending. Consumer confidence is down, although household spending has increased by 1.1% year-over-year.
Indicators of financial stress, such as the Philadelphia Fed report, show that 11.1% of active credit card holders are only making minimum payments—the highest in history.
US consumers’ expected change in their financial situation is near a record low, and buying conditions are weaker. Business optimism and capital expenditure plans are down, likely to recover once Trump’s policies become clear. The extent and location of reshoring remain uncertain, affecting the timeline for recovery.
China
China faces significant challenges if its goods exports are largely cut off from the US market, with the drop in exports equating to around 2.5% of the country’s GDP.
To counteract this, the Chinese government is likely to implement stimulus measures to encourage domestic consumption, helping to absorb some of the excess production.
Additionally, Chinese goods are expected to increasingly find their way into other foreign markets, particularly the EU. This shift could support ongoing disinflation and provide central banks with additional capacity to ease monetary policy.
Australia
In Australia, markets are now pricing in 4-5 rate cuts over 2025, with most expecting a 25-basis point cut in May due to recent market turmoil.
CPI forecasts have been lowered to 2.7% by June, down from the previous 3.2%.
On the import front, tariff changes are anticipated to create a surge of cheaper Chinese imports, benefiting inflation and the rates outlook as Australia has little manufacturing to displace.
However, the export outlook appears weaker due to a lower Australian dollar and trade-weighted index. High Chinese tariffs are not favourable, with the effective tariff rate faced by our trading partner now at 59% compared to the global average of 26%.
Rate cuts in 2025 are expected to benefit leveraged plays with reliable income growth, particularly in the REIT sector. The yield curve in Australia has dropped, which will help underpin the property market.
In terms of ASX market performance last week, the market ended up slightly down from where it started. IT, Communications and Consumer stocks were all stronger over the week while Financials and Health Care lagged. Energy and large-cap materials stocks were under pressure due to lower oil prices and softer commodity prices while the Small Ordinaries, with its high proportion of gold stocks, outperformed the broader market.
About Crispin Murray and Pendal Focus Australian Share Fund
Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.
We have updated and reissued the Product Disclosure Statement (PDS) for the Pendal Sustainable Conservative Fund (the Fund) effective on and from 15 April 2025.
The following is a summary of the key changes reflected in the PDS for the Fund.
Labour, environmental, social and ethical (ESG) considerations
We have enhanced our ESG disclosure to describe the Fund’s sustainability objective, the sustainability assessment framework employed by the Fund in respect of the Australian and International shares, Australian and International fixed interest and part of the Alternative investments asset classes of the Fund and the benefits associated with the Fund’s approach to ESG.
The way the Fund is managed has not changed.
Exclusionary Screens
We have clarified, the Fund’s exclusionary screens are not applied to Australian and International property securities, part of the Fund’s Alternative Investments and certain financial instruments such as securities issued by government, semi-government or supranational entities, cash and derivatives. We have also added that the use of derivatives may result in the Fund having indirect exposure to the excluded companies or issuers.
Updates to significant risks disclosure
The Fund’s investment strategy involves specific risks.
We have updated the significant risks disclosure applicable to the Fund to ensure that our disclosure continues to align with the nature and risk profile of the Fund and the current economic and operating environment.
Updates to ongoing annual fees and costs disclosure
The estimated ongoing annual fees and costs for the Fund have been updated to reflect financial year 2024 fees and costs. These include changes to estimated management costs and estimated transaction costs.
We now also disclose the maximum management fee we are entitled to charge under the Fund’s constitution.
Updates to restrictions on withdrawals
We have updated the disclosure on restrictions on withdrawals to align closer to what is in the Fund’s constitution.
Additional information on how to apply for direct investors
We have provided additional information for non-advised investors (i.e. investors without a financial adviser) investing directly in the Fund who may also be required to complete a series of questions as part of their online Application, to assist us in understanding whether they are likely to be within the target market for the Fund.
Updates to our complaints handling process
We have provided additional details about our complaints handling process and the Australian Financial Complaints Authority.
We have updated and reissued the Product Disclosure Statement (PDS) for the Pendal Sustainable Balanced Fund (the Fund) effective on and from 15 April 2025.
The following is a summary of the key changes reflected in the PDS for the Fund.
Labour, environmental, social and ethical (ESG) considerations
We have enhanced our ESG disclosure to describe the Fund’s sustainability objective, the sustainability assessment framework employed by the Fund in respect of the Australian and International shares, Australian and International fixed interest and part of the Alternative investments asset classes of the Fund and the benefits associated with the Fund’s approach to ESG.
The way the Fund is managed has not changed.
Exclusionary Screens
We have clarified, the Fund’s exclusionary screens are not applied to Australian and International property securities, part of the Fund’s Alternative Investments and certain financial instruments such as securities issued by government, semi-government or supranational entities, cash and derivatives. We have also added that the use of derivatives may result in the Fund having indirect exposure to the excluded companies or issuers.
Updates to significant risks disclosure
The Fund’s investment strategy involves specific risks.
We have updated the significant risks disclosure applicable to the Fund to ensure that our disclosure continues to align with the nature and risk profile of the Fund and the current economic and operating environment.
Updates to ongoing annual fees and costs disclosure
The estimated ongoing annual fees and costs for the Fund have been updated to reflect financial year 2024 fees and costs. These include changes to estimated management costs and estimated transaction costs.
We now also disclose the maximum management fee we are entitled to charge under the Fund’s constitution.
Updates to restrictions on withdrawals
We have updated the disclosure on restrictions on withdrawals to align closer to what is in the Fund’s constitution.
Additional information on how to apply for direct investors
We have provided additional information for non-advised retail investors (retail investors without a financial adviser) investing directly in Class R units of the Fund who may also be required to complete a series of questions as part of their online Application, to assist us in understanding whether they are likely to be within the target market for the Fund.
Updates to our complaints handling process
We have provided additional details about our complaints handling process and the Australian Financial Complaints Authority.
Following an internal review, effective 31 May 2025, we have decided to make the following changes to the benchmark and investment objective of the Fund:
| Current | On and from 31 May 2025 | |
| Benchmark | MSCI World ex Australia (Standard) Index (Net Dividends) in AUD | MSCI ACWI ex Australia Index (Net in AUD) |
| Investment Objective | The Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI World Ex Australia (Standard) Index (Net Dividends) in AUD by 2% p.a. over rolling 3 year periods | The Fund aims to provide a return (before fees, costs and taxes) in excess of the MSCI ACWI ex Australia (Net in AUD) over rolling 5 year periods |
Why are we making the change?
We are making the above changes to the benchmark and investment objective of the Fund for the following reasons:
Benchmark:
The Fund adopts an emulation approach, utilising investment holdings of related parties and/or third party’s investment strategies (Underlying Strategies) (adjusting them as set out in the Information Memorandum to be issued on or around 10 April 2025). These Underlying Strategies are benchmarked against the MSCI ACWI ex Australia Index (Net in AUD). Consequently, changing the Fund’s benchmark to the MSCI ACWI ex Australia Index (Net in AUD) is considered a more appropriate benchmark for performance measurement, as it eliminates the benchmark mismatch.
Investment objective:
The Fund is managed to outperform the benchmark rather than aiming for a set alpha target. Therefore, changing the Fund’s investment objective offers a more representative view of how the Fund is managed and its expected returns over the long term.
Additionally, extending the investment time period from 3 years to 5 years aligns the Fund’s investment objective with the longer-term investment horizon of the adjusted Underlying Strategies implemented within the Fund.
What do you need to do?
An updated Information Memorandum is available upon request. You should consider the updated Information Memorandum and the changes to the benchmark and investment objective of the Fund before deciding whether to acquire or hold units in the Fund.
Questions?
If you have any questions about your investment or would like further information regarding the changes, please contact us on 1300 346 821 (for Australian investors) or +612 9220 2499 (for overseas investors) from Monday to Friday, 8.00am to 5:30pm (Sydney time).
So far US tariffs are a mixed bag for bonds. But understanding Trump could help investors navigate markets, writes Pendal’s head of government bonds, TIM HEXT
PRESIDENT TRUMP’s “reciprocal” tariffs caught many – me included – by surprise last week.
Until then, I mistakenly believed tariffs were all part of the art of the deal.
Tariff talk, which was seen as a tactical ploy to get a better deal for the US, suddenly seemed to have larger ideological aims. How else can you explain the ridiculous calculation method for reciprocal tariffs?
There is still a lot of water to go under the bridge in the weeks and months ahead as negotiations go bilateral – but understanding Trump (always a difficult exercise) will help navigate markets.
When China entered the World Trade Organisation in 2001, the US trade deficit with China was $84 billion. The US had a $300 billion deficit overall in manufacturing. Over next two decades, the manufacturing deficit grew $1 trillion to $1.3 trillion by 2022.
China accounted for almost $600 billion of this growth.
Overall, this was seen as a win/win. China got to develop on the back of hard work and exporting to the US. And US consumers got plenty of cheap goods from China, protecting a standard of living in the face of slow wage growth.
The bonus for the US was that in an attempt to keep its currency lower, the Chinese government bought US dollars and became huge buyers of US Treasuries. Its FX reserves went from $300 billion to over $3 trillion during this period.
Let’s not forget the most important thing: since 2000, around 500 million Chinese people have emerged from poverty to middle incomes.
By 2018, however, geopolitics started to kick in. As China started to flex its muscle globally, not all in the US were happy. The narrative began to change.
In his first term, Trump launched a trade war with China, causing negative equity returns. Helping the Chinese economy was now seen as a negative, not a positive.
That trade war now seems tame. It seems the narrative from Trump is effectively that the US can handle some pain if it means achieving a longer-term new world order. The US will retreat back to some supposed golden age. Time will tell.
Implications for bond markets
As evidenced this week, all these actions from Trump are a mixed bag for US bonds.
Firstly, economic weakness should mean Fed cuts and rallies in bonds. However, tariffs will mean higher inflation – at least near term.
Throwing more confusion into the picture is foreign buying (or more likely selling) of US bonds. Smaller trade deficits mean smaller capital surpluses and therefore, at best, smaller inflows into US capital markets.
Where it gets more interesting, though, is the weaponisation of financial flows – not just trade flows. Rumours have been circling that China is dumping part of its US Treasury holdings.
Other countries may follow – after all, like any investments, you want to know the CEO knows what they are doing, and simply put, credibility and confidence has evaporated. Who would want to lend money to an entity that is acting so aggressively against your interests?
Therefore, the flight to quality is more of a flight to cash and short bonds, not long bonds. Yield curves are steepening faster than economic fundamentals suggest.
It was only late last year when US exceptionalism became the investment theme for this decade. That exceptionalism remains but is quickly being redefined from a positive to a negative.
Implications for our portfolios
We have been leaning into duration for a number of months, but are very disappointed by the lack of a reaction from our long end. Short-end duration has worked, but unlike Covid and the GFC, the long end has been left behind.
The RBA will also be cautious.
The expected low CPI print on 30 April will give the central bank cover to cut at its 20 May meeting, but unless it keeps getting worse, its recent form suggests only a 25-basis-point (bps) cut.
It will then adopt a wait-and-see approach for how it all impacts Australia. But given there are six weeks till then, markets are right to price some risk of a larger cut – though, current levels of 40bps of cuts looks a little too much.
The random nature of announcements mean we are generally keeping risk close to home. Our caution around credit means we are avoiding the major drawdowns that will be hitting more aggressive investors.
Now is not the time to charge in. However, we are still looking for relative value opportunities in a volatile market to keep adding value in these stressed times.
Liquidity
And just like that – liquidity in many sectors dries up in a puff of smoke.
Our portfolios at Pendal Income and Fixed Interest have always operated at the more liquid end of markets. We leave the less-liquid, high-yield chasing to others.
Government bonds remain highly liquid. Semi-government bonds are hanging in there though bid/offers are widening. You can transact senior bank paper assuming manageable size and paying a wider spread.
However, as we have often warned, beyond there it gets very tricky.
Everything is liquid in good times, but it is a shortlist in a time of crisis. The RBA sets the liquidity rules and its world is one of cash, bank bills/NCDs and government bonds (all known as High Quality Liquid Assets).
These remain open for business, but beyond that point, it is buyer-beware for liquidity.
About Tim Hext and Pendal’s Income & Fixed Interest boutique
Tim Hext is a Pendal portfolio manager and head of government bond strategies in our Income and Fixed Interest team.
Tim has extensive experience in banking, financial markets and funding including senior positions with NSW Treasury Corporation (TCorp), Westpac Treasury, Commonwealth Bank of Australia, Deutsche Bank, Bain & Co and Swiss Bank Corporation.
Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.
Find out more about Pendal’s fixed interest strategies here
About Pendal
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.
In 2023, Pendal became part of Perpetual Limited (ASX:PPT), bringing together two of Australia’s most respected active asset management brands to create a global leader in multi-boutique asset management with autonomous, world-class investment capabilities and a growing leadership position in ESG.
Effective 8 April 2025, the buy-sell spread for a number of Pendal funds (the Funds) will increase as set out in the table below:
Table 1: Old and New Buy-Sell Spreads
| Fund Name | Old (%) | New (%) | ||
| Buy | Sell | Buy | Sell | |
| Pendal Dynamic Income Fund | 0.12% | 0.12% | 0.12% | 0.15% |
| Pendal Dynamic Income Trust | 0.12% | 0.12% | 0.12% | 0.15% |
| Pendal Fixed Interest Fund | 0.06% | 0.06% | 0.06% | 0.08% |
| Pendal Monthly Income Plus Fund | 0.10% | 0.10% | 0.10% | 0.16% |
| Pendal Short Term Income Securities Fund | 0.03% | 0.03% | 0.03% | 0.07% |
| Pendal Short Term Income Securities Trust | 0.03% | 0.03% | 0.03% | 0.07% |
| Pendal Sustainable Australian Fixed Interest Fund | 0.07% | 0.07% | 0.07% | 0.11% |
| Regnan Credit Impact Trust | 0.10% | 0.10% | 0.10% | 0.17% |
The buy-sell spread is an additional cost to you and is generally incurred whenever you invest in or withdraw from a Fund. The buy-sell spread is retained by the Fund (it is not a fee paid to us) and represents a contribution to the transaction costs incurred by the Fund such as brokerage and stamp duty, when the Fund is purchasing and selling assets. The buy-sell spread also reflects the market impact of buying and selling the underlying securities in the market. Importantly, the buy-sell spread helps to ensure different unit holders are being treated fairly by attributing the costs of trading securities to those unit holders who are buying and selling units in the Funds.
Due to the impact of the Trump tariff announcement, investment markets have experienced increased volatility. This has led to reduced liquidity and greater market impact when selling Australian credit securities, leading to higher trading costs in these markets, and hence increased trading costs for the Pendal Income and Fixed interest Funds (as set out in Table 1 above). This change does not reflect a deterioration in the credit quality of these assets.
Pendal has determined to increase the buy-sell spread for each of the Funds as set out in Table 1 above. The buy spread is payable on application to a Fund. The sell spread is payable on withdrawal from a Fund.
Pendal will continue to monitor market conditions and review and update the buy-sell spread regularly as required. You should therefore review the current buy-sell spread information before making a decision to invest or withdraw from a Fund.
Please refer to our website www.pendalgroup.com, click ‘Products’, select the Fund and click on ‘View fund information’ for the latest buy-sell spread for each Fund.