WAM Capital (WAM) Investor Update summary

Portfolio performance and positioning

• Income Maximiser fund is outperforming its benchmark, delivering stable returns and a running yield of 4.6%, with profit and capital reserves at 4.7% of net tangible assets.

• Small caps are expected to outperform the broader market, driven by rate cuts, improved outlooks, and attractive valuations, with key picks in luxury auto, technology, industrial services, and telco sectors.

• Real estate, especially REITs, is positioned for a strong recovery due to demand-supply imbalances, positive macro trends, and sector-specific catalysts, with Goodman Group, Mirvac, and GPT Group highlighted as top holdings.

• Global portfolio focuses on undervalued growth companies benefiting from the AI-driven productivity boom, with investments in infrastructure, software, and early AI adopters like Quanta, Synopsys, and SAP.

• Alternative assets portfolio is increasing real estate exposure, capitalizing on the disconnect between listed and unlisted valuations, and offers a diversified mix across private equity, infrastructure, debt, and water.

Market outlook and investment themes

• Short-term interest rates are expected to rise, while long-term rates may stay flat or fall, favoring mining stocks and commodity exposure over defensive sectors.

• AI infrastructure and adoption are seen as generational opportunities, with a focus on companies integrating AI to drive productivity and earnings growth.

• LICs and LITs are anticipated to see narrowing discounts to NTA as interest rates plateau or fall and as active management regains favor, with recent sector expansion and activist campaigns highlighted.

• Alternative assets provide inflation protection, diversification, and smoother returns, with retail investors gaining access to institutional-quality portfolios via listed vehicles.

• Future Generation funds offer diversified, differentiated portfolios with strong dividend yields and a dual focus on shareholder returns and social impact.

Dividend and yield guidance

• Income Maximiser fund is on track to meet dividend guidance, supported by robust income streams and reserves.

• Alternative assets portfolio offers a grossed-up dividend yield of 8.2%, with shares trading at a discount to NTA.

• Future Generation funds provide fully-franked dividends in the 7%-8% range, with strong profit reserves ensuring resilience.