Following a successful 2024 buoyed by the performance of US equities, AMP’s head of portfolio management, Stuart Eliot, believes opportunities still abound on the other side of the pond.
Earlier this month, AMP revealed that a strategic overweight to US and global equities along with an increased exposure to private debt and diversified credit saw the fund deliver a return of over 15 per cent for its three largest Lifestage cohorts in 2024.
Its 1960s and 1950s options, made up of members approaching or in retirement, which have lower growth allocations, saw similarly strong returns of 11.5 per cent and 9.8 per cent, respectively.
At the time, Anna Shelley, chief investment officer at AMP, said: “The quality of returns reflects strategic allocation and active performance by our equity and credit managers to asset classes and our overweight to stocks which we expected to perform strongly during the year, and this strategy has been successful.”
Speaking to Super Review this week, AMP’s head of portfolio management reiterated the benefits the fund reaped as a result of its overweight to US shares – a market segment that he expects will continue to perform strongly over the coming year.
“Overall, we’re very comfortable with our positions, which are delivering great returns for our members, but will continue to rebalance where needed and look for quality buying opportunities in select asset classes,” Eliot said.
“We’ve maintained an overweight position in US equities for more than a year now and see no reason to change. We expect the new administration in the US will support share markets, while the increasing use of AI will start to support productivity of large corporates, and hence profitability.”
In fact, AMP anticipates that US shares will likely “lead world markets” over the next 12 months, owing to some key thematic drivers.
“We expect the US to continue taking a leadership position in AI with investment and development continuing at a pace,” Eliot said.
“This year, we expect the gap between the earnings growth of the ‘Magnificent Seven’ and the rest of the market will narrow as organisations further harness new AI tools to increase their efficiency and profitability.”
The portfolio management lead also expects renewable energy infrastructure to be buoyed by significant tech investments needed to meet the energy demands of AI.
“This means a likelihood of continued earnings growth and support for the jobs which will support the economy and share markets for another year. At this point we therefore retain our long-standing overweight to US equities,” he said.
Advancements in new cross-border payments technology are also expected to play out in the coming year, with some of the large US payments companies like PayPal and Mastercard poised to maintain leadership positions in this space.
Moreover, US regulators are likely to provide clarity in the coming months on the use of stablecoins for payments, following the introduction of Markets in Crypto-Assets Regulation in Europe, which AMP believes could lead to further adoption of blockchain-based payments solutions globally.
Turning to other segments of interest for 2025, Eliot said some changes to portfolio allocations have been made.
“We were previously overweight emerging markets and underweight Australia, a position we’ve now changed, given the potential impact of geopolitical challenges on emerging markets, particularly with likely US economic changes,” he said.
In fixed income, he said, AMP is positive on Australian government bonds relative to US bonds, while in credit “we have limited appetite for high-yield debt due to very tight credit spreads”.
Notably, Eliot said the fund remains open to increasing its allocation to private markets “judiciously and depending on opportunities” over the next 12 months, but added that the investment team is “in no hurry” to alter its position just yet.
“Potentially we’ll see more sellers of unlisted assets next year if the Coalition is elected and enact their policy to allow first home buyers to withdraw money from their super,” he said.
AMP also intends to increase its allocations to direct infrastructure, citing opportunities both domestically and internationally.
“There are plenty of opportunities to choose from and our preference is towards strategies with strong ESG credentials and well-situated opportunities like renewable energy,” he said.
“We’re also seeing an increase in return to the office and have been buying direct property funds at attractive discounts. We’ll continue to consider these opportunities on a case-by-case basis.”
Looking ahead, Eliot said that the fund remains focused on “high-quality assets and long-term holding opportunities”.
In December, AMP announced its first foray into bitcoin, confirming a modest allocation to the cryptocurrency.
Speaking to Super Review at the time, Eliot said that after “testing and careful consideration by our investment team and committee”, the company decided to include “a small and risk-controlled position” in digital assets within its Dynamic Asset Allocation program earlier last year.
“The exposure, which represents around 0.05 per cent of our total superannuation assets under management, recognises the structural changes in the industry over the past year, including the launch of exchange traded funds by leading international investment managers,” he said at the time.
