Advisers put faith in global equities, small caps in 2025

A new study from Fidante suggests financial advisers will remain bullish on global equities and Australian small caps in the coming months.

The Fidante Adviser Markets Survey, which surveyed more than 200 advisers, shows these are the asset classes advisers believe show the most promise, despite high valuations and economic headwinds.

Global equities

Fidante found that close to half of the group (46%) remain bullish on the performance of global equities, with 39% predicting the asset class will perform the best over the period.

Further, 20% of advisers plan to increase allocations to the asset class in the next six months.

However, despite the bullish outlook, advisers have flagged concerns that global markets may be becoming too expensive, with 26% citing high valuations as the leading concern, followed by economic slowdown (23%) and geopolitical tensions (22%).

In light of the trend, Challenger chief executive, funds management Victor Rodriguez said the results explain the recent strong inflows into global equities and increasing active management to capitalise the opportunities.

"Led by the US, global equities have driven significant outperformance for several years now, and our research shows that advisers expect this trend to continue as we enter 2025," Rodriguez said.

"Specifically, AI and healthcare are driving exciting growth potential in global equities, and we expect inflows to reflect this.

"As we head into 2025, advisers' optimism highlights the lasting appeal of global equities as a powerful tool to generate returns, even amid economic challenges."

Aussie small caps

The study also revealed that advisers (51%) are bullish on Australian small caps, compared to only 32% preferring Australian large cap stocks.

This view is also supported by Kris Webster from Canopy Investors, saying a second Donald Trump administration in the US could spike growth in this sector.

Over one third (35%) are expecting to increase client allocations to the asset class, second only to fixed income (41%), the study found.

Fidante Affiliates general manager Evan Reedman said diversification is still at the forefront of advisers' mind.

"Advisers are responding to high valuations in large cap stocks. We're observing a clear shift in focus towards Australian small cap equities, with advisers recognising untapped value in this space after lagged performance in recent years," Reedman said.

"Fidante's latest Adviser Markets Survey shows that diversification and targeted allocation remain a key priority for advisers with infrastructure (30%), private credit (24%), and private equity (18%) capturing their attention.

"There is no doubt that advisers are looking for active management in market segments that provide a clear purpose in a portfolio. Whether that be to generate alpha, provide uncorrelated returns, or deliver a consistent income stream."

Additionally, local economic slowdown (44%) and high valuations (27%) are by far the two leading concerns surrounding Australian equities.