Australia is in a surprisingly good position to weather the Trump administration’s trade policies, says Pendal’s head of government bonds TIM HEXT in this fast podcast

You can also listen to this podcast on Apple or Spotify

An excerpt from this interview with Pendal’s head of government bond strategies Tim Hext:

An excerpt from this interview with Pendal’s head of government bond strategies Tim Hext:

Australia is in a surprisingly good position to weather the Trump administration’s global storm, believes Pendal’s head of government bonds, Tim Hext.

“We have reasons to be optimistic down here, albeit it’s not going to be quite as good as it could have been.

“We’re going to get very close to all our long-term aspirations this year.

Inflation is expected to end the year around 2.7% – within a whisker of the 2.5% target. (Read Tim’s take on the latest inflation data here).

Growth is likely to be around 2.25%, unemployment around 4.25% and wages around 3% to 3.25%, he says.

“The trouble of course is what Trump and his tariffs may do to that – but I still think we can be reasonably confident Australia will weather the upcoming storm well.

On rates, Tim sees the RBA “gradually coming around to that view that full employment is around about where we are now”. That likely means at least three more rate cuts this year.

“Clearly if you were to get global concerns really feeding through, we might see a lower path, but I think the base path is around to about 3.35% cash rates.

So in a sense, you’d have all the data and the cash rates pretty much on what most people would consider to be averages through the cycle.

Not a bad spot to be in.

Listen to the full podcast above or 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.

---

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.

The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.

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.

Contact a Pendal key account manager

In this video profile, Pendal’s head of government bond strategies TIM HEXT explains why the case for bonds – and active management – has never been stronger

An excerpt from Tim’s interview

In this video, Tim Hext – head of government bond strategies at Pendal – shares insights drawn from a 30-year career spanning trading desks, bank balance sheets and state government funding.

His deep understanding of both the macro conditions and inner workings of bond markets have helped shape the strategy behind the Pendal Government Bond Fund.

Tim explains how Pendal’s active management approach can help capture value beyond the macroeconomic view, through the skillful selection of securities from across the government bond universe.

“Even in volatile conditions, government bonds give investors the flexibility to respond – to rebalance, or to lean into opportunity,” he says.

“We position for where the economy is going – not where it’s been – and we go deep on security selection. Knowing how different states fund and price their debt helps us capture opportunities others miss.”

Watch the video to learn more about Tim and Pendal’s active approach to fixed-income investing.

Get to know the rest of the team better in these individual profile videos:

---

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.

The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.

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.

Contact a Pendal key account manager

In this video profile, Pendal PM George Bishay explains the advantages of our Income and Fixed Interest team’s process

An excerpt from George’s interview

WHILE fixed income forms the defensive part of a diversified portfolio, offering investors a lower degree of volatility relative to equities, it still requires skill and experience to navigate through the market cycle.

Pendal’s Income and Fixed Interest team benefits from the diverse experience of its four lead portfolio managers, says head of credit and sustainable strategies George Bishay.

“If you think about the four lead portfolio managers, the average experience is 28 years per person,” he says. “The other important aspect of our team is they’re all experts in their own field across the sub-sectors within fixed income, whether that’s credit, government bonds or cash.”

In this video, Bishay — who has spent more than three decades working in credit, analysis and portfolio management roles — explains how Pendal’s investment process is a “real differentiating factor relative to our peer group”.

“A big differentiator to the way we manage money is our top-down process and our active de-risking and re-risking of our portfolios based on our process,” he says. “That unique top-down process combines our qualitative views and quantitative models with technical analysis.”

Watch the full video to learn more about George and the investment process of Pendal’s Income and Fixed Interest team.

Get to know our portfolio managers better in these individual profile videos:

In this video, head of income strategies AMY XIE PATRICK outlines the decision-making and risk management frameworks driving Pendal’s investment process

An excerpt from Amy’s interview

Pendal’s head of income strategies Amy Xie Patrick has more than 20 years of experience in fixed-income investing.

In this profile video, Amy shares three key lessons she’s learned over her career.

The first is having an effective system to look through the noise and identify market signals.

“If you can come up with a good system, it means you stand a good chance of staying upright and finding your way when the rest of the market becomes rudderless.

“The second lesson is change always happens and you should be prepared for it. I think the hallmark of a good active investor is that you use change and volatility to your advantage, rather than become a deer in the headlights because of it.”

Lastly, Amy cites the importance of a solid decision-making framework.

“You can make good decisions and still have a bad outcome. But a good decision-making framework means it’s more likely that you’ll end up with a string of good results, rather than a string of bad ones.”

Amy also outlines Pendal’s proprietary toolkit, which encompasses a range of qualitative and quantitative models.

“We have extensive models that give us hints as to what way to position that may be more favourable in the future compared to others — and that sets us apart because it gives us a slight edge in terms of how we react to market events.

“Having this very robust toolkit at our disposal means that we can navigate the entire market cycle.”

Watch the video to learn more about Amy and the investment processes that help set Pendal’s Income and Fixed Interest team apart. 

Get to know our portfolio managers better in these individual profile videos:

As the world undergoes a massive power shift, Pendal Global Select Fund co-manager CHRIS LEES explains how investors can benefit

• Redistribution of global power and influence will impact investors
• Opportunity in energy independence and defence
• Learn more about the Pendal Global Select Fund

INVESTORS shouldn’t fear a shift towards an era of “multi-polarity” where power and influence are distributed among more countries or regions, rather than one or two superpowers.

While such a change would bring geopolitical and economic challenges, it could also create significant opportunities for investment, says Chris Lees, co-portfolio manager of Pendal Global Select Fund.

A re-alignment of global priorities — particularly in regions such as Europe and Japan — has sparked a renewed focus on strengthening industrial bases, upgrading critical infrastructure, and increasing defence spending, Lees says.

These developments align with the strategic focus of numerous companies within the Pendal team’s international equities portfolio — and could see them benefit from these transformative trends.

Below Lees outlines several important trends.

1. Energy independence

“In Europe, the push for energy independence and infrastructure modernisation is accelerating,” says Lees.

“Investments in renewable energy, grid upgrades and industrial automation are critical as the region seeks to reduce external dependencies and transition toward a greener economy.”

Companies specialising in energy management, automation, and advanced grid solutions should be well-placed to benefit from this structural shift, he says.

“As Europe invests heavily in renewable energy projects and grid interconnectivity, companies leading in high-tech cable manufacturing are also poised to see significant demand growth.

“Their expertise will be instrumental in enabling Europe to achieve its sustainability and energy security goals.”

2. Defence and national security

The European Union has signalled sharp increases in defence spending as the war in Ukraine continues and the US appears to become more isolationist.

Japan is also undergoing a significant transformation, renewing its focus on revitalising its industrial base includes infrastructure upgrades and bolstering defence spending.

Co-portfolio managers, Nudgem Richyal and Chris Lees

Japan has pledged to increase defence spending to 2 per cent GDP by 2027, marking a pivotal shift toward strengthening national security, says Lees.

“Companies with expertise in advanced materials and manufacturing technologies are set to play a pivotal role in supporting Japan’s defence modernisation and infrastructure upgrade effort, providing additional tailwinds for these firms,” he says.

“Across the board, we believe aerospace and defence sectors will be key beneficiaries of this multi-polar shift.

“Companies providing advanced steel, telecommunications and engine technologies remain critical for manufacturing military equipment and infrastructure projects in both regions.”

Investing in supply chains

These investments are not only about enhancing military capabilities, but also about ensuring strategic autonomy by building robust domestic supply chains, Lees says.

“This is an area where several of our investment team’s holdings have strong competitive advantages.

“These businesses are critical suppliers to both Japanese and European markets as they prioritise technological sovereignty.”

Growing multi-polarity underscores the importance of geographic diversification in equity portfolios, he says.

“We believe the companies strategically aligned with the priorities of industrialised nations offer strong growth potential through their involvement in critical sectors such as energy, defence, and infrastructure development.

“As industrial nations navigate this new era, we remain committed to identifying opportunities that not only deliver strong returns but also position our portfolio at the forefront of long-term global shifts.”

---

About Chris Lees and Nudgem Richyal

Chris Lees co-manages Pendal Global Select Fund with Nudgem Richyal. The pair have been working together in global equities investing for more than 20 years.

Chris has more than 32 years of investment industry experience. He joined Pendal Group’s UK-based asset manager J O Hambro Capital Management (JOHCM) in 2008 after spending 19 years at Baring Asset Management, ultimately as head of its global sector team.

---

 

Navigating climate strategy and regulatory uncertainty calls for nuanced action, writes Regnan’s Oshadee Siyaguna

• Find out about Regnan Global Equity Impact Solutions Fund
• Download Regnan’s Navigating climate strategy amid regulatory turbulence

THE urgency of climate change is clear. But despite rising global temperatures, extreme weather events, and increasingly dire scientific warnings, policy momentum appears to be slowing.

That’s according to Regnan Senior Thematic Investment Analyst Oshadee Siyaguna, who provides insight into these complex dynamics in the sustainable investor’s latest report: Navigating climate strategy amid regulatory turbulence.

A shifting political landscape

Recent policy reversals in the United States have cast a shadow over global climate governance. And the US federal government’s retreat from greenhouse gas (GHG) regulations has sent a troubling signal worldwide.

“The pullback from GHG regulations signals a broader disruption to global climate governance,” explains Oshadee.

“Despite ongoing state-level initiatives, this federal shift has encouraged other nations to reconsider their own commitments.”

Yet Oshadee also points out that countries like Argentina and Indonesia face significant economic and diplomatic constraints that prevent them from easily abandoning their Paris Agreement obligations.

“Unlike the US, these countries are economically and diplomatically tied to proponents of the Paris Agreement – walking away isn’t straightforward for them,” he notes.

Economic pressures cast a long shadow

Climate policy does not exist in isolation – it intersects deeply with socio-economic realities. The lingering effects of COVID-19, coupled with the ongoing conflict in Ukraine and persistent inflationary pressures, have reshaped the landscape.

Oshadee highlights how these intertwined crises have created a challenging environment for climate action.

“The pandemic left behind record government debts and disrupted labour markets, while the Ukraine conflict has significantly exacerbated energy insecurity,” he explains.

“Together, these factors have made emission reduction policies appear as additional drivers of energy cost inflation.”

This perception has sparked social unrest globally, with many citizens viewing climate policies as yet another burden during already difficult economic times.

Protests reveal societal tensions

The rise in global protests underscores growing dissatisfaction with current climate policies – but not always in ways we might expect. While many protests demand stronger climate action, there is also a notable surge in anti-climate demonstrations, particularly among labour groups.

“Workers in transitioning industries often bear significant costs,” says Oshadee.

“These anti-climate protests reflect a critical oversight: policymakers haven’t adequately addressed the social dimensions of transition.

“There’s a real need for equitable frameworks that consider communities dependent on traditional industries.”

Corporate strategies shift amid uncertainty

Policy turbulence has forced corporations to reconsider their climate commitments. A prime example is energy giant bp, which recently revised its ambitious climate targets established in 2020.

This strategic recalibration illustrates how companies are navigating uncertainty by adopting more cautious approaches amid shifting regulatory sands.

Is policy action inevitable? Read more in Navigating climate strategy amid regulatory turbulence

The concept of an “inevitable policy response” suggests that societies will eventually implement robust climate policies when confronted by severe impacts, but Oshadee cautions that this inevitability depends heavily on public awareness and political will.

“The likelihood of a disorderly transition is rising due to escalating physical impacts and persistent policy uncertainty,” he says.

“If societies delay action until impacts become undeniable, we risk reaching critical tipping points.”

Balancing ambition with realism

Corporate climate commitments often reflect complex strategic calculations. Companies frequently set ambitious targets to differentiate themselves, even when technological solutions remain uncertain or political readiness is limited.

Oshadee explains this dynamic: “Companies set ambitious targets partly to differentiate themselves from peers. Once one company commits publicly, others feel pressure to follow suit – even if technological readiness lags behind.”

This creates an industry-wide balancing act between differentiation (standing out through bold commitments) and conformity (aligning with industry norms).

“Companies calculate that risks associated with unmet commitments apply universally across their industry,” he adds.

Navigating an uncertain future

Looking ahead, Oshadee sees challenges looming on the horizon.

Escalating physical impacts from climate change – such as floods occurring far more frequently – are compressing risk timelines into shorter periods than previously anticipated.

“The physical impacts of climate change are unfolding faster than anticipated,” he emphasises.

“We’re now seeing events once labelled ‘once-in-a-century’ happening every few decades or even more frequently.”

He also argues that policymakers must recognise these shortened timeframes and adapt accordingly, noting that “we need inclusive policies that address socio-economic impacts on communities undergoing substantial transformations.”

A call for nuanced action

Ultimately, Oshadee stresses that effective climate strategies must acknowledge complex economic realities and societal dynamics.

“Climate change doesn’t care about political ideology or economic convenience – it’s agnostic.

“The challenge lies in navigating these complex interactions between environmental imperatives, economic pressures, and societal dynamics.”

The path forward demands clear-eyed recognition of these complexities – and decisive yet equitable action – to avoid the most severe impacts of climate change.

The outlook is still positive for fixed-income investors hoping for lower yields (and therefore higher prices on their bond investments), argues Pendal’s AMY XIE PATRICK

You can also listen to this podcast on Apple or Spotify

An excerpt from this podcast

---

Amy Xie Patrick, Pendal’s head of income strategies:

Fixed-income investors looking for lower yields – and therefore higher prices on their bond investments – may be disappointed with the recent cycle.

“When I’ve been speaking to clients over the past few weeks, many have been worried that the cutting cycle is not translating to lower bond yields in the same way we’ve seen previously,” notes Pendal’s Amy Xie Patrick in her latest fast podcast.

But investors need not be concerned, since conditions still favour a rate-cutting environment, says Amy, who leads Pendal’s fixed-income strategies.

Underlying inflation is under control – supported by a looser US labour market which has not yet been impacted by President Trump’s mooted immigration crack-down. n Australia a tighter labour market has not led to significant wage increases.

“The market’s priced in two more US cuts this year, maybe another two in Australia.

“The RBA has enough room to get back to neutral fairly quickly… And the Federal Reserve probably has the ability to move a little bit more than the market’s priced in.

“It’s still a choppy year ahead – but this is where a proven active process for duration and rates really does count for fixed-income portfolios.”

Founder-led companies have created enormous wealth for shareholders but they also come with challenging risks. Regnan analysts GRACE ZHANG and OSHADEE SIYAGUNA explain

• Risk in founder-led firms
• Robust governance required
• Read Regnan’s full report: Masters of Control
• Find out more about Regnan

STEVE Jobs, Mark Zuckerberg, Rupert Murdoch, Elon Musk – there is a seemingly endless rollcall of visionary founders that have generated extraordinary wealth for shareholders.

But for all the attractions of founder-led companies, concentration of control in a powerful shareholder also carries inherent risk – founders may limit board independence, prioritise their own interests over those of shareholders, or act in a way that damages a company’s culture and reputation.

Recent governance dramas at several ASX-listed companies illustrate how founder influence can pose a challenge for investors.

So, how should investors to think about founder-led companies?

A new study from responsible investing leader Regnan sets out some principles to help manage the delicate balance between harnessing the strength of founders and mitigating their inherent risks.

Fundamentally, Regnan finds success comes down to robust governance frameworks – ensuring independent boards, sunset clauses for dual-class shares, and transparent conflict-of-interest policies.

“Founder-led [companies] are engines of innovation, resilience, and long-term growth, yet their concentrated power structures can pose significant governance risks,” say the report’s authors, Regnan analysts Grace Zhang and Oshadee Siyaguna.

“By striking the right balance between entrepreneurial freedom and accountability, founder-led, controlled companies can unlock their full potential while fostering trust among all stakeholders.”

Governance risk

Founder-led companies can outperform due to their long-term focus, stable leadership, and commitment to innovation.

A deep alignment between the company’s success and the interests of controlling shareholders allows for strategic consistency and a resilience to help weather economic downturns.

But founder-led companies also come with unique risks.

Regnan’s research finds that chief among these are the potential for boards to be compromised by close ties to founders, a tendency for founders to act as CEO and chair, dual-class voting structures that disadvantage minority shareholders, excessive remuneration, nepotism, and the risk of related-party transactions.

“While controlling shareholding may constitute a factor of influence to stock performance in general, it certainly amplifies governance risks of controlled companies,” say the authors.

Regnan found multiple case studies illustrating governance risks.

Companies with Australian connections came in for particular criticism.

Rupert Murdoch’s News Corporation spent US$674 million buying the Shine Group production company that was 53 per cent-owned by the founder’s daughter, Elisabeth Murdoch, despite misgivings among minority shareholders.

Retailer Kogan.com granted its founders retention-focused options valued at A$70 million and A$46.7 million respectively, despite 42 per cent of shareholders voting against the grant. When ultimately cash-settled, the payout represented 51 per cent of the company’s total cash on hand.

Poker machine maker Aristocrat Leisure agreed to provide its founder, Len Ainsworth, with a new car every three years for the rest of life – and cover all running costs. The long-retired Ainsworth has been quoted suggesting he wants a “Rolls Royce as a final gift”.

Advice for investors

Regnan suggests a series of steps investors can use to protect their interests while still getting access to the potential upside of founder-led companies by proactively addressing governance risk and fostering accountability.

Key recommendations from the report include ensuring board committees retain independence, seeking separate chair and CEO roles, seeking transparent conflict-of-interest policies, and pursuing sunset clauses for dual class share structures.

 

How should investors interpret Donald Trump’s whipsaw approach to tariffs? What does it all mean for inflation and markets? Pendal’s head of bonds TIM HEXT explains in our latest fast podcast

You can also listen to this podcast on Apple or Spotify

An excerpt from this interview with Pendal’s head of government bond strategies Tim Hext:

Investors could not be blamed for feeling a bit queasy at Donald Trump’s whipsaw approach to tariffs.

Trump has imposed and suspended tariffs on Canada and Mexico this week — and remains in a tit-for-tat  tussle with China at the time of writing. 

What does it all mean for inflation and markets?

“The tariff threat does add to this argument that inflation isn’t about to come down anytime soon,” says Pendal’s head of bond strategies Tim Hext.

“The market is right to be a little bit concerned. Obviously free trade — or some version of free trade — is generally to the benefit of both parties.

“The law of comparative advantage says you end up focusing on what you are a cheap producer of.

“If you start throwing sand into the gears of free trade that’s not a good thing.

“Ultimately, I think it is bad for growth and will mean slightly higher inflation, but not enough to suddenly cause rate hikes in the near future.

“It creates a lot of short-term noise, but fortunately investors with a medium-to-long-term time-frame can leave it to people like me to worry about that.”

Tim says investors should hold course for now.

In the podcast Tim lays out his latest thinking on fixed interest investing.

Listen to the full podcast above

---

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.

The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.

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.

Contact a Pendal key account manager

One of the surprises of 2024 was the absence of rate cuts in Australia. What happened and how long will the Reserve Bank sit on its hands? Pendal’s head of income strategies AMY XIE PATRICK explains in this review of 2024

You can also listen to this podcast on Apple or Spotify

An excerpt from this podcast

---

Amy Xie Patrick, Pendal’s head of income strategies:

The RBA has stood pat all year long, and even the market’s expectations about what they’ll do in 2025 continues to get pushed out.

I think that surprised almost everyone in 2024.

What was the reason for that? Where was the surprise in 2024 that meant we didn’t see the rate cuts we expected in Australia, and even the US Fed was a bit less ambitious than expected?

At the end of 2023, a year ago, it was very much a narrative of inflation is now coming down into central bank’s target ranges.

We can see that happening and it’s no longer a massive inflationary shock problem that we had in 2022.

Since we can see this trend, and since we know that at 4.35% cash rate in Australia or 5.5% Fed funds rate in the US are pretty restrictive levels of monetary policy.

The market was betting that the inflation trends would be enough to get both of these major central banks into a steady cutting cycle that would result in an anticipated seven or eight cuts from the US over 2024 and four or five cuts from the RBA over 2024.

The surprise this year has been not so much a lack of progress on inflation because that’s happened and is still happening.

But the surprise has been the resilience of economic activity.

This is especially so in the US. Whether it’s because of leftover stimulus cheques in consumer pockets or whether it’s because asset prices have done extremely well since the pandemic stimulus was delivered, the US consumer is just not crumbling.

And the US consumer still drives 70% of GDP growth over there.

That economic resilience has shown up time and time again over the course of 2024.

And the Fed is, I think, understandably reluctant to engage in a preset path of interest-rate easings given that the economic backdrop isn’t as soft as they thought it would be.